Question

Macroeconomics

True or False? Please explain shortly and make sure of the answer. Thanks.

3. An increase of interest rate increases the stock price.

4. Monopoly and monopsony affect the unemployment.

5. The open market operation is the changes in interest rate in open market.

6. The high reserve requirement increases money creation.

7. The money value and price level have the positive relationship.

9. An inflation tax is tax put onto inflation.

11. 1973-1975 recession is due to aggregate demand shift.

12. 2001 recession is due to aggregate demand shift.

14. The velocity of money circulation is not increasing over time.

15. The multiplier effect has the adverse relation with marginal propensity to consume.

16. The crowding effect expands the multiplier effect.

17. A recession results in decrease of welfare program.

18. A recession and the tax are not related.

19. The unemployment and inflation are in inverse relation.

20. The unemployment and inflation relation are related to aggregate demand.

26. The trade deficit increases net capital inflow.

27. The export increases consumer surplus.

Answer 1

3. False. The interest rate and stock prices are negatively related. This is because as rate of interest increases, investment and business spending falls, which leads to fall in the demand of stocks and this stock prices will fall. And reverse happens in the case of declining rate of interest in the economy.

4. True. Monopoly and Monopsony both affect the level of unemployment in the economy. This is because it impacts labor demand and supply and this level of unemployment in the economy.

5. False. Open market operations refers to the buying and selling of government securities by the Central Bank.

6. False. The higher the reserve requirement lowers the excess reserves of banks and thus loans given by banks which reduces supply of money and thus reduces money creation in the economy.