Explain fully how an easy money policy can lower the interest rate in the short-run but...
Explain fully how an easy money policy can lower the interest rate in the short-run but increase the interest-rate in the long-run. Be sure to distinguish between real and nominal interest rates.
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Explain fully how an easy money policy can lower the interest
rate in the short-run but...
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....
Which of the following can a country increase in the long run by increasing its money...
Which of the following can a country increase in the long run by increasing its money growth rate? Select one: a. the nominal wage divided by the price level b. real output c. real interest rates d. None of the above is correct.
Draw a graph (money market and the interest parity graph) that shows both the short run...
Draw a graph (money market and the interest parity graph) that shows both the short run and long run effect of expansionary monetary policy on the exchange rate. label the long run and short run effect on the graphs clearly. explain what is going on in the graphs.
7. According to the theory of liquidity preference, decreasing the money supply will nominal interest rates...
7. According to the theory of liquidity preference, decreasing the money supply will nominal interest rates in the short run, and, according to the Fisher effect, decreasing the money supply will nominal interest rates in the long run. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase 8. If neither investment nor consumption depends on the interest rate, then the IS curve is , and_ policy has no effect on output. A) vertical; monetary B) horizontal; monetary...
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...
3. Explain how an increase in government spending affects real interest rate, money demand and the...
3. Explain how an increase in government spending affects real interest rate, money demand and the general price level in the long run.
Which statement best defines the velocity of money? (1 mark) a. It is the rate at...
Which statement best defines the velocity of money? (1 mark) a. It is the rate at which the central bank puts money into the economy. b. It is the long-term growth rate of the money supply. c. It is the money supply divided by nominal GDP. d. It is the average number of times per year a dollar is spent. In the 1970s, in response to recessions caused by an increase in the price of oil, the central banks in...
Economics: 1) Why is it possible to change real economic factors in the short run simply...
Economics: 1) Why is it possible to change real economic factors in the short run simply by printing and distributing more money? 2) Explain why a stable 5% inflation rate can be preferable to one that averages 4% but varies between 1-7% regularly. 3) Explain the difference between active and passive monetary policy. 4) Suppose the economy is in long-run equilibrium, with real GDP at $16 trillion and the unemployment rate at 5%, Now assume that the central bank unexpectedly...
(i) Explain the difference between the nominal and real interest rate. (ii) How does the Reserve...
(i) Explain the difference between the nominal and real interest rate. (ii) How does the Reserve Bank of Australia control the interest rate? (iii) You hear a news report that output growth and inflation are lower than expected. How do you expect that report to affect market interest rates? Explain why. (iv) The Reserve Bank faces a large recessionary gap. How would you expect it to respond? Explain step by step how its policy change is likely to affect the...
3. Assume that country J is in a situation of short and medium run equilibrium. Assume...
3. Assume that country J is in a situation of short and medium run equilibrium. Assume that the government of J wants to foster output without increasing public expenditures. i. Which policy should the govern ment adopt? [2p] ii. Explain the short-run effects of this policy on interest rate, investments and money supply. [4p] iii. Explain the medium-run effects of the policy on the price level and on the real money supply.[3p] iv. What happens to the nominal exchange rate...
7. According to the theory of liquidity preference, decreasing the money supply will nominal interest rates in the short run, and, according to the Fisher effect, decreasing the money supply will nominal interest rates in the long run. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase 8. If neither investment nor consumption depends on the interest rate, then the IS curve is , and_ policy has no effect on output. A) vertical; monetary B) horizontal; monetary...
3. Explain how an increase in government spending affects real interest rate, money demand and the general price level in the long run.
3. Assume that country J is in a situation of short and medium run equilibrium. Assume that the government of J wants to foster output without increasing public expenditures. i. Which policy should the govern ment adopt? [2p] ii. Explain the short-run effects of this policy on interest rate, investments and money supply. [4p] iii. Explain the medium-run effects of the policy on the price level and on the real money supply.[3p] iv. What happens to the nominal exchange rate...
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