Homework Answers
a) The graph will look like this after reducing the money supply.
b) As a result of the change the interest rates "rises".
c) A decrease in the demand for the money at a higher rate. At the higher interest rate, the demand for the money will decrease. People will keep more money in the banks to earn an interest and spend less.
The answer is "An decrease in the demand for money."
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Below is a graph of the short run. Refer to the graph to answer the following...
Using the data in the table below, answer the following questions. (Hint: draw a graph when...
Using the data in the table below, answer the following questions. (Hint: draw a graph when possible) Interest Rate% Money Demand (billions of dollars) 180 580 Assume that the money supply is equal to 240 (do not use % signs in your answers) Part 1: What is the equilibrium rate of interest? Number Part 2: Assume that the Bank of Canada buys bonds and increases the money supply to 400 What is the equilibrium rate of interest? Number Part 3:...
The following questions refer to the graph below. MO Interest Rate Moº - Quantity of Money...
The following questions refer to the graph below. MO Interest Rate Moº - Quantity of Money a. Explain (and show in the diagram) why the Bank of Canada cannot independently set the money supply and the interest rate. (Hint: try explaining what would happen if the bank did try holding the money supply where it is and set the interest rate above or below the equilibrium above.) (4 marks) b. Suppose the Bank leaves the money supply unchanged but that...
9. Refer to the Figure13-2. If the economy were initially in equilibrium at r0 and E0...
9. Refer to the Figure13-2. If the economy were initially in equilibrium at r0 and E0 and the government removed import quotas, what would happen to the exchange rate? a. It would appreciate to E1. b. It would appreciate to E2. c. It would depreciate to E1. d. It would depreciate to E2. ____ 10. When a country experiences capital flight, which of the following best explains the effects? a. The interest rate falls because the demand for loanable funds shifts left....
Using the IS-LM and Aggregate Supply-Aggregate Demand (AS-AD) models of Chapter 12 with a flat short-run...
Using the IS-LM and Aggregate Supply-Aggregate Demand (AS-AD) models of Chapter 12 with a flat short-run AS curve (that is, completely sticky prices), suppose the economy is at the natural rate of unemployment and so, at long-run equilibrium. Suddenly, taxes are reduced with no change in government spending. Tell me (or show on a graph) what happens to the IS and/or LM curves. Show on a different graph what happens on the AS-AD diagram in the short-run (drawing in the...
The following table shows the quantity of money supplied and the quantity of money demanded for various interest rates 4...
The following table shows the quantity of money supplied and the
quantity of money demanded for various interest rates
4. Study Questions and Problems #4 The following table shows the quantity of money supplied and the quantity of money demanded for various interest rates. Interest Rate (Percent) Demand for Money (Billions of dollars) Supply of Money (Billions of dollars) 500 100 300 500 500 700 900 500 500 500 The following graph depicts the money supply curve in orange. On...
Using the data in the table below, answer the following questions. (Hint drawa graph when possible)...
Using the data in the table below, answer the following questions. (Hint drawa graph when possible) Money Demand (billions of dollars) Interest Rate% 12 200 11 220 10 240 260 300 8 360 420 500 600 Assume that the money supply is equal to 260 (do not use % signs in your answers) Number Part 1: What is the equilibrium rate of interest? Number Part 2, Assume that the Bank of Canada buys bonds and increases the money supply to...
Businesses in some parts of Canada are eligible for The Atlantic Investment Tax Credit, a 10%...
Businesses in some parts of Canada are eligible for The Atlantic Investment Tax Credit, a 10% tax credit. The Canadian government has decided to decrease this credit from 10% to 5%. The graph below is the hypothetical loanable funds market in Canada prior to the cut. a. Use the interactive graph to illustrate the impact this decrease in the tax credit will have, holding all else constant. Supply 10 8 7 4 2 Demand 0 5 10 15 20 25...
If the short-run aggregate supply decreases by more than the long-run aggregate supply, then, at the...
If the short-run aggregate supply decreases by more than the long-run aggregate supply, then, at the short-run equilibrium, a) Output will be equal to its natural level. b) Output will be above its natural level. O c) Unemployment will be equal to the natural rate of unemployment. d) Output will be below its natural level. Facebl» wides anಂಕು Suppose the economy is at point C. If investment spending decreases in the economy, where will the eventual long-run equilibrium be? a)...
Describe three types of short-run macroeconomic equilibrium.
Describe three types of short-run macroeconomic equilibrium. A macroeconomic equilibrium in which real GDP is less than potential GDP is _______ equilibrium. And one in which real GDP equals potential GDP is _______ equlibrium. A. a below full-employment, a full-employment B. a full-employment, a below full-employment C. a full-employment, an inflationary D. a below full-employment, a recessionary The graph shows an economy's long-run aggregate supply curve. The economy is at an above full-employment equilibrium. Draw an aggregate demand curve and a short-run aggregate supply curve. Label them. In the graph,...
I. The economy of Zarland is operating below the full-employment level of output with a balanced budget. (a) Draw a correctly labeled graph of short-run aggregate supply, long-run aggregate supply, a...
I. The economy of Zarland is operating below the full-employment level of output with a balanced budget. (a) Draw a correctly labeled graph of short-run aggregate supply, long-run aggregate supply, and aggregate demand, and show each of the following. (Gi) The country's current equilibrium output and price level, labeled Yj and PL1. respectively (ii) The full-employment output, labeled Yf (b) Ir Zarland increases government expenditures and taxes by equal amounts, can aggregate demand increase? Explain. (c) If Zarland decides to...
Using the data in the table below, answer the following questions. (Hint: draw a graph when possible) Interest Rate% Money Demand (billions of dollars) 180 580 Assume that the money supply is equal to 240 (do not use % signs in your answers) Part 1: What is the equilibrium rate of interest? Number Part 2: Assume that the Bank of Canada buys bonds and increases the money supply to 400 What is the equilibrium rate of interest? Number Part 3:...
The following questions refer to the graph below. MO Interest Rate Moº - Quantity of Money a. Explain (and show in the diagram) why the Bank of Canada cannot independently set the money supply and the interest rate. (Hint: try explaining what would happen if the bank did try holding the money supply where it is and set the interest rate above or below the equilibrium above.) (4 marks) b. Suppose the Bank leaves the money supply unchanged but that...
Using the IS-LM and Aggregate Supply-Aggregate Demand (AS-AD) models of Chapter 12 with a flat short-run AS curve (that is, completely sticky prices), suppose the economy is at the natural rate of unemployment and so, at long-run equilibrium. Suddenly, taxes are reduced with no change in government spending. Tell me (or show on a graph) what happens to the IS and/or LM curves. Show on a different graph what happens on the AS-AD diagram in the short-run (drawing in the...
The following table shows the quantity of money supplied and the
quantity of money demanded for various interest rates
4. Study Questions and Problems #4 The following table shows the quantity of money supplied and the quantity of money demanded for various interest rates. Interest Rate (Percent) Demand for Money (Billions of dollars) Supply of Money (Billions of dollars) 500 100 300 500 500 700 900 500 500 500 The following graph depicts the money supply curve in orange. On...
Using the data in the table below, answer the following questions. (Hint drawa graph when possible) Money Demand (billions of dollars) Interest Rate% 12 200 11 220 10 240 260 300 8 360 420 500 600 Assume that the money supply is equal to 260 (do not use % signs in your answers) Number Part 1: What is the equilibrium rate of interest? Number Part 2, Assume that the Bank of Canada buys bonds and increases the money supply to...
Businesses in some parts of Canada are eligible for The Atlantic Investment Tax Credit, a 10% tax credit. The Canadian government has decided to decrease this credit from 10% to 5%. The graph below is the hypothetical loanable funds market in Canada prior to the cut. a. Use the interactive graph to illustrate the impact this decrease in the tax credit will have, holding all else constant. Supply 10 8 7 4 2 Demand 0 5 10 15 20 25...
If the short-run aggregate supply decreases by more than the long-run aggregate supply, then, at the short-run equilibrium, a) Output will be equal to its natural level. b) Output will be above its natural level. O c) Unemployment will be equal to the natural rate of unemployment. d) Output will be below its natural level. Facebl» wides anಂಕು Suppose the economy is at point C. If investment spending decreases in the economy, where will the eventual long-run equilibrium be? a)...
I. The economy of Zarland is operating below the full-employment level of output with a balanced budget. (a) Draw a correctly labeled graph of short-run aggregate supply, long-run aggregate supply, and aggregate demand, and show each of the following. (Gi) The country's current equilibrium output and price level, labeled Yj and PL1. respectively (ii) The full-employment output, labeled Yf (b) Ir Zarland increases government expenditures and taxes by equal amounts, can aggregate demand increase? Explain. (c) If Zarland decides to...
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