Homework Answers
False, the demand for money depends very little on the interest rate when it is flatter, it is so because when the Aggregate Demand curve is flat it means money multiplier would be more and that would cause changes in quantity demanded of money instead of interest rate.
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3. [10 marks) Suppose that the demand for money depends very little on the interest rate...
- Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against...
- Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the...
Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the...
Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate (on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the demand...
10. Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of...
10. Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of money demand is zero. Suppose that the central bank increases the money supply by 10% and real income increases by 3%. Assuming that the real interest rate is 4%, what will be the equilibrium nominal interest rate? (a) 10%. (b) 11.6% (e) 7.6%. (d) 12.4%
t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted...
t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than...
Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of money...
Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of money demand is zero. Suppose that the central bank increases the money supply by 10% and real income increases by 3%. Assuming that the real interest rate is 4%, what will be the equilibrium nominal interest rate? (a) 10%. (b) 11.6%. (c) 7.6%. (d) 12.4%.
If at some specific interest rate the quantity of money demanded is less than the quantity...
If at some specific interest rate the quantity of money demanded is less than the quantity of money supplied, people will desire to buy interest-earning assets causing the interest rate to decrease. Select one: True False In recent years, the Fed has conducted policy by setting a target for the federal funds rate. Select one: True False A decrease in taxes is an expansionary fiscal policy designed to increase aggregate demand and reduce unemployment. Select one: True False If aggregate...
please have a detail process D. Suppose the money demand is given by: (15 marks) Md...
please have a detail process
D. Suppose the money demand is given by: (15 marks) Md = $Y (0.24 – i) where $Y is $300. Also, suppose that the supply of money is $60. Assume equilibrium in financial markets. 1. Find Md for i = 4% and i = 9%? (6 marks) 2. Graph Md and M$ and calculate the equilibrium interest rate? (6 marks) 3. If the Bank of Canada wants to increase i by 10% (from, say, 4%...
5. (10 Marks) The money market for the economy of Charlton is depicted in the graph...
5. (10 Marks) The money market for the economy of Charlton is depicted in the graph given below (all dollar figures are in billions): Interest rate 50 100 150 200 250 300 Quantity of money The investment demand curve is shown in the following figure. 250 50 100 150 200 Quantity of investment Suppose that the central bank of Charlton wishes to use contractionary monetary policy and decreases the money supply by $50 billion. a. Draw the new money supply...
Which of the following best describes the process (in order) of how monetary policy effects the macroeconomy? A. The 3 players have to cooperate, the aggregate demand changes, interest rate change, in...
Which of the following best describes the process (in order) of how monetary policy effects the macroeconomy? A. The 3 players have to cooperate, the aggregate demand changes, interest rate change, investment and consumption change and then the money supply changes. B. The 3 players have to cooperate, the money supply changes, interest rate change, investment and consumption change, and then the aggregate demand changes. C. They 3 players have to cooperate, interest rate change, the money supply changes, investment...
Interest Rate MS 4% 3% 2% d Money Demand Quantity of Money At an interest rate...
Interest Rate MS 4% 3% 2% d Money Demand Quantity of Money At an interest rate of 4 percent, there is an excess Select one: a. supply of money equal to the distance between points a and c. b. demand for money equal to the distance between points a and b. C. demand for money equal to the distance between points b and c. d. supply of money equal to the distance between points a and b. Assume that the...
- Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the...
Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate (on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the demand...
10. Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of money demand is zero. Suppose that the central bank increases the money supply by 10% and real income increases by 3%. Assuming that the real interest rate is 4%, what will be the equilibrium nominal interest rate? (a) 10%. (b) 11.6% (e) 7.6%. (d) 12.4%
t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than...
please have a detail process
D. Suppose the money demand is given by: (15 marks) Md = $Y (0.24 – i) where $Y is $300. Also, suppose that the supply of money is $60. Assume equilibrium in financial markets. 1. Find Md for i = 4% and i = 9%? (6 marks) 2. Graph Md and M$ and calculate the equilibrium interest rate? (6 marks) 3. If the Bank of Canada wants to increase i by 10% (from, say, 4%...
5. (10 Marks) The money market for the economy of Charlton is depicted in the graph given below (all dollar figures are in billions): Interest rate 50 100 150 200 250 300 Quantity of money The investment demand curve is shown in the following figure. 250 50 100 150 200 Quantity of investment Suppose that the central bank of Charlton wishes to use contractionary monetary policy and decreases the money supply by $50 billion. a. Draw the new money supply...
Interest Rate MS 4% 3% 2% d Money Demand Quantity of Money At an interest rate of 4 percent, there is an excess Select one: a. supply of money equal to the distance between points a and c. b. demand for money equal to the distance between points a and b. C. demand for money equal to the distance between points b and c. d. supply of money equal to the distance between points a and b. Assume that the...
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