Question

An increase in the Money Supply: Select one: O a. leads to a fall in prices and an increase in consumption, shifting the AD to the left O b.leads to an increase in net exports, shifting the AS to the right O c. leads to a fall in interest rates and a consequent increase in investment, shifting the AD to the right O d. none of the above if a country that is a trade partner of ours falls into recession: Select one: O a. this will have no impact on our economy O b. this will make our GDP increase O c. this will lead to a fall in exports from our country to theirs, shifting the AD to the left O d. this will lead to a fall in exports from our country to theirs, shifting the AS to the left

Answer 1

1.....answer c

explanation -An increase in money supply increasincreases liquidity in the economy, so interest rate fall,consumer and investment spending increase ,which causes aggregate demand curve to shift rightward. Consumer and investment spending are major components of AD.

2 .. answer c

explanation ‐ A recession in our trading country will lower its import demand. Thus our export will decrease, reducing our AD.Net export (X—M) is a component of AD ,so aggregate demand ( AD) curve shifts leftward.

3 answer A

Explanation- Quantitative easing is a process of increasing money supply into the economy through sales of predetermined amounts of government bonds or other financial assets by the central bank.

4 .....answer A

Explanation An expansionary monetary policy in the long run only leads to rise in the price level because long run aggregate supply (LAS) only change by the change in quantity of factors of production.

5   answer C

Explanation- Under the recessionary period expansionary monetary policy is used to increase the money supply in the economy. The central bank can directly increase the money supply by selling government bonds and other financial assets under open market operations.