Homework Answers
Money neutrality refers to the fact that:-
increase in the money supply will, in the medium run only affect the price level but nor output or the interest rate.
According to the neutrality of money, the changes in the stock of money affects only the nominal variables like the price level, wages, and no effect on the real variables such as employment, real GDP, etc.
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Please match the right answer to each question A change in which of these variables will...
4. Which of the following statements about monetary neutrality is accurate? (x) Printing money to finance...
4. Which of the following statements about monetary neutrality is accurate? (x) Printing money to finance government expenditures has profound effects on real variables in the long run, but is neutral in the short run. (y) Although monetary policy is neutral in the long run, it may effect real variables in the short run. (z) In the long run when money is neutral, nominal interest rates increase when the money supply growth rate increases, but real interest rates do not....
080302 Monetary neutrality implies that an increase in the quantity of money will increase employment increase...
080302 Monetary neutrality implies that an increase in the quantity of money will increase employment increase the price level increase the incentive to save. not increase any of the above. QUESTION 5 080304 The classical dichotomy argues that changes in the money supply affect both nominal and real variables. affect neither nominal nor real variables. affect nominal variables, but not real variables. do not affect nominal variables, but do affect real variables. QUESTION 6 080305 According to the principle of...
OY 10. By referring to Figure 7-1, an increase in the money stock a shifts the...
OY 10. By referring to Figure 7-1, an increase in the money stock a shifts the LM schedule to the right from LMoto LM b shifts the LM schedule to the left from LMo to LM e leaves the LM curve unchanged at LM. d. shifts neither the IS nor the LM schedule. 11. Changes in all of the following shift the LM curve except a. the price level. b. income. c. the money supply. d. money demand. e. all...
Question 4 Discuss the following statements: (a) According to the IS-LM model how would an increase...
Question 4 Discuss the following statements: (a) According to the IS-LM model how would an increase of government spending affect equilibrium interest rates and income in a short-run closed macroeconomy. (b) According to the Classical Model of the aggregate economy, changes in aggregate demand have no effect on the amount of output produced, only the average pricelevel may be affected. (c) Crowding out through interest rates occurs when expansionary fiscal pol-icy causes interest rates to fall. (d) The relative bargaining...
2. The demand for money is: Mº = PYL (1), where P is the price level,...
2. The demand for money is: Mº = PYL (1), where P is the price level, Y is the real GDP and L () is an inverse function of the rate of interest (i.e. when i increases, L (1) decreases, and vice versa). Money supply is: M$ = mH, where H is the high-powered money issued by the central bank and m is the money multiplier. (a) Draw the money demand and supply curves on a graph with money demand...
Junly 8. Which of the following statements is correct? A During the 1990s, U.S. Inflation averaged...
Junly 8. Which of the following statements is correct? A During the 1990s, U.S. Inflation averaged about 2 percent per year. B. A period of hyperinflation is a period of extraordinarily low inflation C A period of deflation is any period during which the inflation rate is decreasing. D. All of the above are correct. E A and B. only 9. Which of the following statements about the classical dichotomy is (are) correct? (X) According to the classical dichotomy, an...
What reference? Name: For each of the following events, use an AD-AS diagram to show the...
What reference?
Name: For each of the following events, use an AD-AS diagram to show the short-run and long-run effects on output and the price level (inflation rate); identify any output gap. Assume the economy starts in long run equilibrium. (1) The government reduces income taxes AS P AD (2) A decrease in consumer confidence leads to lower consumption spending AS P. AD AD-AS practice assignment.pdf 2/2 (3) The Fed decreases the money supply AS Pe K AD y* (4)...
Suppose that the money demand function takes the form If output grows at rate and the...
Suppose that the money demand function takes the form If output grows at rate and the nominal interest rate is constant, at what rate will the demand for real balances grow? What is the velocity of money in this economy? If inflation and nominal interest rates are constant, at what rate, if any, will velocity grow? How will a permanent (once-and-for-all) increase in the level of interest rates affect the level of velocity? How will it affect the subsequent growth...
1. Consider a money demand function that takes the form (M/P)' = Y/3i, where Mis the...
1. Consider a money demand function that takes the form (M/P)' = Y/3i, where Mis the quantity of money, P is the price level, Y is real output, and i is the nominal interest rate (measured in percentage points). a. What is the velocity of money if the nominal interest rate is constant? b. How will the level of the velocity of money change if there is a permanent (one time) increase in the nominal interest rate, holding other factors...
In this question you are expected to match the right question to the right answer.... When...
In this question you are expected to match the right question to the right answer.... When Output Y is higher than the natural level of output Yn what happens to inflation? ✓ Choose... The change in inflation rate is positive Output is lower than the natural level of output Output is equal to the natural level of output The change in inflation rate is equal to zero When the rate of unemployment is higher than the natural rate of unemployment...
080302 Monetary neutrality implies that an increase in the quantity of money will increase employment increase the price level increase the incentive to save. not increase any of the above. QUESTION 5 080304 The classical dichotomy argues that changes in the money supply affect both nominal and real variables. affect neither nominal nor real variables. affect nominal variables, but not real variables. do not affect nominal variables, but do affect real variables. QUESTION 6 080305 According to the principle of...
OY 10. By referring to Figure 7-1, an increase in the money stock a shifts the LM schedule to the right from LMoto LM b shifts the LM schedule to the left from LMo to LM e leaves the LM curve unchanged at LM. d. shifts neither the IS nor the LM schedule. 11. Changes in all of the following shift the LM curve except a. the price level. b. income. c. the money supply. d. money demand. e. all...
2. The demand for money is: Mº = PYL (1), where P is the price level, Y is the real GDP and L () is an inverse function of the rate of interest (i.e. when i increases, L (1) decreases, and vice versa). Money supply is: M$ = mH, where H is the high-powered money issued by the central bank and m is the money multiplier. (a) Draw the money demand and supply curves on a graph with money demand...
Junly 8. Which of the following statements is correct? A During the 1990s, U.S. Inflation averaged about 2 percent per year. B. A period of hyperinflation is a period of extraordinarily low inflation C A period of deflation is any period during which the inflation rate is decreasing. D. All of the above are correct. E A and B. only 9. Which of the following statements about the classical dichotomy is (are) correct? (X) According to the classical dichotomy, an...
What reference?
Name: For each of the following events, use an AD-AS diagram to show the short-run and long-run effects on output and the price level (inflation rate); identify any output gap. Assume the economy starts in long run equilibrium. (1) The government reduces income taxes AS P AD (2) A decrease in consumer confidence leads to lower consumption spending AS P. AD AD-AS practice assignment.pdf 2/2 (3) The Fed decreases the money supply AS Pe K AD y* (4)...
1. Consider a money demand function that takes the form (M/P)' = Y/3i, where Mis the quantity of money, P is the price level, Y is real output, and i is the nominal interest rate (measured in percentage points). a. What is the velocity of money if the nominal interest rate is constant? b. How will the level of the velocity of money change if there is a permanent (one time) increase in the nominal interest rate, holding other factors...
In this question you are expected to match the right question to the right answer.... When Output Y is higher than the natural level of output Yn what happens to inflation? ✓ Choose... The change in inflation rate is positive Output is lower than the natural level of output Output is equal to the natural level of output The change in inflation rate is equal to zero When the rate of unemployment is higher than the natural rate of unemployment...
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