Speculators and fully anticipated expansionary monetary policy problem

  • Thread starter Bipolarity
  • Start date
In summary, speculators are individuals or entities who engage in risky investments to make a profit. "Fully anticipated" refers to the market's expectation of expansionary monetary policy, which involves increasing the money supply and lowering interest rates to stimulate economic growth. However, speculators can impact the effectiveness of this policy by anticipating and reacting to its effects on interest rates and inflation. Some potential problems with fully anticipated expansionary monetary policy include creating asset bubbles and potential destabilization of the economy if the policy is not implemented as expected.
  • #1
Bipolarity
776
2
http://img39.imageshack.us/img39/6386/macro2.jpg [Broken]

I don't understand the answer to this question.
The answer is
C
but I don't understand why.

BiP
 
Last edited by a moderator:
Physics news on Phys.org
  • #3
Looks like C from the above power point. Of course that assumes an equal distribution of new money (the helicopter effect) which is not really the case as is pointed out in, “The case against the fed”.
 

1. What is a speculator?

A speculator is a person or entity who buys and sells assets, such as stocks or commodities, in order to make a profit. They often engage in risky investments in hopes of making a high return.

2. What does "fully anticipated" mean in regards to expansionary monetary policy?

Fully anticipated refers to the expectation that a central bank will take action to stimulate economic growth through expansionary monetary policy. This means that the market has already factored in the potential effects of the policy on interest rates and inflation.

3. What is expansionary monetary policy?

Expansionary monetary policy is a type of policy used by central banks to stimulate economic growth. It involves increasing the money supply and lowering interest rates to encourage borrowing and spending, which can stimulate economic activity and inflation.

4. How do speculators impact the effectiveness of expansionary monetary policy?

Speculators can impact the effectiveness of expansionary monetary policy by anticipating and reacting to the policy's effects on interest rates and inflation. If speculators anticipate that a policy will lead to high inflation, they may increase their buying and selling activity, which can affect the effectiveness of the policy in achieving its intended goals.

5. What are some potential problems with fully anticipated expansionary monetary policy?

Some potential problems with fully anticipated expansionary monetary policy include the risk of creating asset bubbles, as investors may engage in excessive risk-taking in pursuit of higher returns. Additionally, if the policy is not implemented as expected, it can lead to unexpected market reactions and potentially destabilize the economy.

Similar threads

Replies
2
Views
2K
  • Calculus and Beyond Homework Help
Replies
3
Views
1K
Replies
5
Views
1K
  • Engineering and Comp Sci Homework Help
Replies
3
Views
2K
  • Introductory Physics Homework Help
Replies
2
Views
3K
Replies
10
Views
4K
  • Advanced Physics Homework Help
Replies
1
Views
1K
  • Introductory Physics Homework Help
2
Replies
44
Views
5K
  • Introductory Physics Homework Help
Replies
4
Views
1K
  • General Discussion
2
Replies
47
Views
5K
Back
Top