Consider the following: I. There is a negative relationship between interest rates and the money supply. II. There...
Consider the following:
I. There is a negative relationship between interest rates and the money supply.
II. There is a positive relationship between interest rates and the money supply.
a. I is always true; II is always false.
b. II is always true and I is always false.
c. I is true in the short run and II is true in the long run.
d. Both I and II are always false.
Homework Answers
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Consider the following:
I. There is a negative
relationship between interest rates and the money supply.
II. There...
Statements True False When the Fed increases the money supply, short-term interest rates tend to dedine....
Statements True False When the Fed increases the money supply, short-term interest rates tend to dedine. Actions that lower short-term interest rates will always lower long-term interest rates. Long-term interest rates are not as sensitive to booms and recessions as are short-term interest rates. The Federal Reserve Board has a significant influence over the level of economic activity, inflation, interest rates in the United States
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...
18. Long-term interest rates are set by: (a) the supply and demand for money (b) the...
18. Long-term interest rates are set by: (a) the supply and demand for money (b) the supply and demand for bonds (c) the supply and demand for both bonds AND money (d) the coupon, or interest payment on a bond. 19. What is fixed and does not change on a bond is: (a) the price of the bond (b) the interest rate on the bond ! (c) the interest payment or coupon on a bond (d) all of the above
165 9. Which of the following should not be considered to be a supply side policy?...
165 9. Which of the following should not be considered to be a supply side policy? a. a decrease in the deficit b. a reduction of the tax on consumption c. a middle class tax cut d. none of the above 10. Whenever the aggregate supply curve shifts, the short rur aggregate supply curve also shifts. However, it is not the case that whenever the short run aggregate supply curve shifts, the long run aggregate supply curve also shifts. a....
5) The positive relationship between short-run aggregate supply and the price level indicates that, in the...
5) The positive relationship between short-run aggregate supply and the price level indicates that, in the short run, •A) firms produce more output as the price level falls. •B) firms produce more output as the price level rises. •C) the money wage rate increases when moving along the short-run aggregate supply curve. •D) lower price levels are more profitable for firms.
Long run aggregate supply is the relationship between the quantity of real GDP supplied and the...
Long run aggregate supply is the relationship between the quantity of real GDP supplied and the price level when the maintain full employment changes in step with the price level to O A. money wage rate OB. quantity of money OC. real wage rate OD. interest rate supplied and the when the money wage rate, the prices of other resources and Short run aggregate supply is the relationship between the quantity of potential GDP remain constant O A real GDP...
An increase in the money supply: increases income and lowers the interest rate in both the short...
An increase in the money supply: increases income and lowers the interest rate in both the short and long runs increases income in both the short and long runs, but leaves the interest rate unchanged in the long run lowers the interest rate in both the short and long runs, but leaves income unchanged in the long run.lowers the interest rate and increases income in the short run, but leaves both unchanged in the long run.
6. When the Federal Reserve Bank changes the money supply and interest erve Bank changes the money supply and inter...
6. When the Federal Reserve Bank changes the money supply and interest erve Bank changes the money supply and interest rates to affect the economy, this is called and it's a policy. a fiscal policy, Keynesian b. growth policy: Classical c. monetary policy: Classical d. monetary policy, Keynesian 7. An example of a long run Classical policy to increase potential GDP is a. the Federal Reserve implementing monetary policy to get the economy out of recession b. the government subsidizing...
Macroeconomics -1. Most economists believe that prices are: A) B) C) D) flexible in the short...
Macroeconomics
-1. Most economists believe that prices are: A) B) C) D) flexible in the short run but many are sticky in the long run. flexible in the long run but many are sticky in the short run. sticky in both the short and long runs. flexible in both the short and long runs. 2. The aggregate demand curve is the relationship between the quantity of output demanded and the A) positive; money supply B) negative; money supply C) positive;...
13. Use the money market and FX market to answer the following question about the relationship...
13. Use the money market and FX market to answer the following question about the relationship between the British pound (£) and the U.S. dollar (S). The exchange rate is in U.S. dollars per British pound, Esjs. Assume the United States temporarily expands its money supply, how does the exchange rate change in the short-run and in the long-run? (a) The exchange rate decreases (the dollar appreciates) in the short-run and remains (b) The exchange rate decreases (the dollar appreciates)...
Statements True False When the Fed increases the money supply, short-term interest rates tend to dedine. Actions that lower short-term interest rates will always lower long-term interest rates. Long-term interest rates are not as sensitive to booms and recessions as are short-term interest rates. The Federal Reserve Board has a significant influence over the level of economic activity, inflation, interest rates in the United States
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...
18. Long-term interest rates are set by: (a) the supply and demand for money (b) the supply and demand for bonds (c) the supply and demand for both bonds AND money (d) the coupon, or interest payment on a bond. 19. What is fixed and does not change on a bond is: (a) the price of the bond (b) the interest rate on the bond ! (c) the interest payment or coupon on a bond (d) all of the above
165 9. Which of the following should not be considered to be a supply side policy? a. a decrease in the deficit b. a reduction of the tax on consumption c. a middle class tax cut d. none of the above 10. Whenever the aggregate supply curve shifts, the short rur aggregate supply curve also shifts. However, it is not the case that whenever the short run aggregate supply curve shifts, the long run aggregate supply curve also shifts. a....
5) The positive relationship between short-run aggregate supply and the price level indicates that, in the short run, •A) firms produce more output as the price level falls. •B) firms produce more output as the price level rises. •C) the money wage rate increases when moving along the short-run aggregate supply curve. •D) lower price levels are more profitable for firms.
Long run aggregate supply is the relationship between the quantity of real GDP supplied and the price level when the maintain full employment changes in step with the price level to O A. money wage rate OB. quantity of money OC. real wage rate OD. interest rate supplied and the when the money wage rate, the prices of other resources and Short run aggregate supply is the relationship between the quantity of potential GDP remain constant O A real GDP...
An increase in the money supply: increases income and lowers the interest rate in both the short and long runs increases income in both the short and long runs, but leaves the interest rate unchanged in the long run lowers the interest rate in both the short and long runs, but leaves income unchanged in the long run.lowers the interest rate and increases income in the short run, but leaves both unchanged in the long run.
6. When the Federal Reserve Bank changes the money supply and interest erve Bank changes the money supply and interest rates to affect the economy, this is called and it's a policy. a fiscal policy, Keynesian b. growth policy: Classical c. monetary policy: Classical d. monetary policy, Keynesian 7. An example of a long run Classical policy to increase potential GDP is a. the Federal Reserve implementing monetary policy to get the economy out of recession b. the government subsidizing...
Macroeconomics
-1. Most economists believe that prices are: A) B) C) D) flexible in the short run but many are sticky in the long run. flexible in the long run but many are sticky in the short run. sticky in both the short and long runs. flexible in both the short and long runs. 2. The aggregate demand curve is the relationship between the quantity of output demanded and the A) positive; money supply B) negative; money supply C) positive;...
13. Use the money market and FX market to answer the following question about the relationship between the British pound (£) and the U.S. dollar (S). The exchange rate is in U.S. dollars per British pound, Esjs. Assume the United States temporarily expands its money supply, how does the exchange rate change in the short-run and in the long-run? (a) The exchange rate decreases (the dollar appreciates) in the short-run and remains (b) The exchange rate decreases (the dollar appreciates)...
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