In the short run, if the central bank decreases the money supply, the currency will ______ and output will ______. a. appreciate; rise b. appreciate; fall c. depreciate; rise d. depreciate; fall
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- What is the expected impact of a decline in the money supply to the US economy? A. Higher aggregate prices (inflation) B. Lower aggregate prices (deflation) C. There is no general relationship between the money supply and inflatonCarefully explain and show the effect of a decrease in economic activity on the money market. Show and explain the effect of an increased economic activity on the money market.Which of the following is correct? The demand for money *a. increases as real GDP increases.b. increases when the interest rate increases.c. depends on the quantity of money.d. decreases as the price level increases
- Consider a closed economy where the goods and money markets are described by the following relationships: C = 200 + 0.9(Y – T) 1 = 400 – 15r M = 200 + Y – 100r G = 150 T = 100 M = 2000 P = 2 Where Cis planned consumption, / is planned investment spending, Tis government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. Department of Economics a) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships. b) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). Compute also the level of consumption and investment spending in equilibrium and check whether the actual level of spending matches the equilibrium level of output.Assume that the monetary base (B) is $100 billion, the reserve-deposit ratio (m) is 0.1, and the currency-deposit ratio (cr) is 0.1. a) What is the money supply? b) If rr changes to 0.2, but cr is 0.1 and B is unchanged, what is the money supply? c) If rr is 0.1 and cr is 0.2, but Bis unchanged, what is the money supply?How do changes in interest rates impact consumer spending, business investment, and overall economic activity, and how does the central bank use interest rates as a tool of monetary policy? A) Changes in interest rates have no effect on economic activity. B) Lower interest rates typically encourage consumer borrowing and business investment, stimulating economic activity. The central bank uses interest rate adjustments as a tool to influence borrowing and spending. C) Higher interest rates boost economic activity by increasing consumer savings. D) Changes in interest rates only affect government spending.
- Suppose the central bank in the nation of Zook attempts to pay off its national debt by printing large amounts of currency. The large increase in the money supply causes the price level to rise by 1,300 percent. What do you expect will happen to the value of Zook's currency? Instructions: Round your answer to the nearest whole number. The value of Zook's currency will (Click to select) by percent.Money market equilibrium depends on what the central bank targets. How does the money market adjust to the equilibrium? If the central bank targets _______. A. the short-term interest rate, the quantity of money demanded adjusts B. the quantity of money demanded, the short-term interest rate adjusts C. the monetary base, the quantity of money supplied adjusts D. the quantity of money, the short-term interest rate adjustsIf the ratio of currency to deposits (cr ) increases , while the ratio of reserves to deposits ( rr ) is constant and the monetary base ( B ) is constant , then : A) it cannot be determined whether the money supply increases or decreases . b) . the money supply increases . c) . the money supply decreases . d) the money supply does not change .
- Question 1. A country’s money supply equals 300 bln USD, nominal GDP equals 3000 bln USD, and real GDP – 1500 bln USD in 2018. Calculate the price level and the velocity of money. Assume output increases by 10% next year. Determine what money supply should the central bank of this country set next year in order to keep the prices stable. Discuss what can happen if the growth of a country's money supply is faster than the growth of its output. Use the quantity theory of money to support your statement.Which of the following statements is false A. Money is not a comsumption or a capital good B. An increase in the money supply does not confer a general benefit on society C. Economic theory cannot tell us generally which groups benefit and which groups are injured by inflation D. Economic theory cannot tell us the supply of money that is proper for an economy to haveAn increase in the U.S. money supply will cause Canada’s ___________ curve to move right