In a short ( 250-400 word EACH QUESTION) post, please discuss the following prompt and include references.

timer Asked: Dec 19th, 2018
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TEXTBOOK USED IN COURSE: Exploring Economics 7th edition By Sexton

1. Why do price floors and price ceilings both reduce the quantity of goods traded in those markets? Can you think of an example of this phenomenon?

2. In retrospect, what should have been the Federal Reserve's Monetary Policy during the 2008 financial crisis? Contrast what they should have done with what they did, and show that your advice is sound.

3. Evaluate the following statement: The Keynesian assumption of wage and price rigidity best corresponds to the flattest portion of the aggregate supply curve where factories are operating below capacity.

4. Can the Fed target both the money supply and the interest rate at the same time? If so, what would be the result? If not, why not?

5. Choose one of the below, and show how that event would likely affect the value of the dollar relative to the euro?

a. Interest rates in the European Union increase relative to the United States.

b. The European Union price level rises relative to the U.S. price level.

c. The European central bank intervenes by selling dollars on currency markets.

d. The price level in the United States falls relative to the price level in Europe.

Tutor Answer

School: Carnegie Mellon University


Student’s Last Name 1
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Student’s Last Name 2
1. Why do price floors and price ceilings both reduce the number of goods
traded in those markets? Can you think of an example of this phenomenon?
The contention now and again encompasses the costs and amounts set up by demand
and supply, particularly for items that are viewed as necessities. Now and again, discontent
over costs transforms into open weight on government officials, who may then pass
enactment to keep a specific cost from climbing "excessively high" or falling "excessively
low". Monetary analysts can foresee how individuals and firms will respond to laws that
control cost by utilizing the demand and supply show.
Laws ordered by the legislature to manage costs are called value controls. Value
controls come in two flavors. A value roof shields a cost from transcending a specific
dimension—the "roof". A value floor shields a cost from falling underneath a specific
dimension—the "floor". We can utilize the demand and supply system to comprehend value
roofs. In numerous business sectors for products and ventures, demanders dwarf providers.
Customers, who are likewise potential voters, some of the time, join to persuade the
legislature to hold down a specific cost.
The primary guideline of monetary aspects is you don't get something to no end—
everything has an open door cost. So if leaseholders get "less expensive" lodging than the
market requires, they will in general additionally wind up with lower quality lodging as stated
by Ralph Winter (1998). Value roofs are authorized trying to keep costs low for the
individuals who request the item—be it lodging, doctor prescribed medications, or accident
protection. However, when the market cost isn't permitted to ascend to the harmony level,
amount requested surpasses amount provided, and in this manner, a deficiency happens. The
individuals who figure out how to buy the item at the lower value given by the value roof will
profit, however, merchants of the item will endure, alongside the individuals who are not
ready to buy the item by any means. Quality is additionally liable to break down.

Student’s Last Name 3
A value floor is a least legitimate value that can be paid in a business opportunity for
products and enterprises, work, or budgetary capital. Maybe the best-known case of a value
floor is the lowest pay permitted by law, which depends on the regulating view that
somebody working all day should have the capacity to manage the cost of an essential way of
life. The government the lowest pay permitted by law toward the finish of 2014 was $7.25
every hour, which outputs a salary for a solitary individual marginally higher than the
neediness line. As the typical cost for basic items ascends after some time, Congress
intermittently raises the government the lowest pay permitted by law.
Value floors are now and then called value bolsters since they bolster a cost by
keeping it from falling beneath a specific dimension. Around the globe, numerous nations
have passed laws to make farming value underpins. Ranch costs,...

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