4. Consider the money market model with the interest rate and the AD-AS model. In cases below, choose correct change in the interst rate and correct shift of the AD curve. 4.a. Central bank increased the money supply. Change in interest rate: Decrease or Increase Shift of AD: Leftward or Rightward 4.b. Central bank decreased the money supply. Change in interest rate: Decrease or Increase Shift of AD: Leftward or Rightward 5. Suppose that the economy fell into a recession. Which is the usual policy the central bank uses to stabilize the economy: Contractionary monetary policy or Expansionary monetary policy?

4. Consider the money market model with the interest rate and the AD-AS model. In cases below, choose correct change in the interst rate and correct shift of the AD curve. 4.a. Central bank increased the money supply. Change in interest rate: Decrease or Increase Shift of AD: Leftward or Rightward 4.b. Central bank decreased the money supply. Change in interest rate: Decrease or Increase Shift of AD: Leftward or Rightward 5. Suppose that the economy fell into a recession. Which is the usual policy the central bank uses to stabilize the economy: Contractionary monetary policy or Expansionary monetary policy?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Which of the following is false in the dynamic AS-AD model? An increase in the natural level of…

A: The AD-AS model is a means of explaining how national income is determined and how price levels…

Q: Suppose that an economy begins in equilibrium at E, as depicted in the graph to the right. Assume…

A: Aggregate demand basically refers to overall demand of goods and services by an economy in a period…

Q: Assume the Federal Reserve triples the growth rate of the quantity of money in circulation. In the…

A: The long-run aggregate supply (LRAS) curve represents the relationship between the price level and…

Q: AD or AS a. A decrease in the personal income tax rate b. An increase in Government Spending c.…

A: Hi! thanks for the question but as per the guidelines, we answer only one question up to three…

Q: 33. An increase in the money supply Group of answer choices a. Shifts the aggregate demand curve to…

A: Answer: According to the Keynesian theory, an increase in the money supply decreases the rate of…

Q: Which of the following statements best describes how the economy will adjust on its own in the long…

A: In case of unemployment there would be a downward pressure on wages => the cost of production of…

Q: 2. The graph below shows the AD-AS model in short-run equilibrium at a price level, Po, and a level…

A: The aggregate demand in the economy shows the total spending done by various sectors of the economy…

Q: 2. The graph below shows the AD-AS model in short-run equilibrium at a price level, Po, and a level…

A: The aggregate demand in the economy shows the total spending done by various sectors of the economy…

Q: * Q₁ Real Output Refer to the diagram. Assume both upward and downward price and wage flexibility in…

A: Aggregate demand is the finished goods and services total demand that is produced in the economy. It…

Q: Please help me with this questions wih explanantion.

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: 5. Assume the government follows a Keynesian approach and alters spending to return the economy to…

Q: Fill in the blanks to make the following statements correct. a. Macroeconomic equilibrium occurs at…

A: Aggregate demand refers to the term used in macroeconomics to tell us the total demand for products…

Q: The economy is currently producing at potential output. The relationship between the real interest…

A: Answer in Step 2

Q: 5. Short-run shocks in the AD-AS model The following graph shows an economy that is initially in…

A: Aggregate demand is sum of the consumption expenditure, investment expenditure, government…

Q: 29. Money demand is a decreasing; real a. b. function of the increasing; real increasing: nominal…

A: Money demand refers to an individual's demand for money in the form of different assets like bonds,…

Q: Gráfica 1 Gráfica 2 NIVEL DE PRECIOS AS nivel de precio AS-1 150 140 AS-0 120 110 AD-0 AD-1 AD-0 100…

A: In the figure 1, the aggregate demand curve shifts leftwards. The aggregate demand curve continues…

Question

100%

4. Consider the money market model with the interest rate and the AD-AS model. In cases below, choose
correct change in the interst rate and correct shift of the AD curve.
4.a. Central bank increased the money supply.
Change in interest rate: Decrease or Increase
Shift of AD: Leftward or Rightward
4.b. Central bank decreased the money supply.
Change in interest rate: Decrease or Increase
Shift of AD: Leftward or Rightward
5. Suppose that the economy fell into a recession. Which is the usual policy the central bank uses to stabilize
the economy: Contractionary monetary policy or Expansionary monetary policy?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Explain the relation of interest rates and the AD-AS framework.

VIEW

Step 2: 4a. Explain when the central bank increased the money supply.

VIEW

Step 3: 4b. Explain when the central bank decreased the money supply.

VIEW

Solution

VIEW

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

None
Assume that the general level of prices increases. Which of the following best describes what happens to the money market, AE model and AD curve? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a We shift the AD curve to the left because the interest rate increases, the aggregate expenditures curve decreases and equilibrium Y decreases. We shift the AD curve to the right because the interest rate decreases, the aggregate expenditures curve increases and equilibrium Y increases. с We move along the AD curve because the interest rate decreases, the aggregate expenditures curve increases and equilibrium Y increases. We move along the AD curve because the interest rate increases, the aggregate expenditures curve decreases and equilibrium Y decreases.
Explain the effect, if any, that each of the following occurrencesshould have on the aggregate demand curve.a. The Fed lowers the discount rate.b. The price level decreases.c. The federal government increases federal income tax rates inan effort to reduce the federal deficit.d. Pessimistic firms decrease investment spending.e. The inflation rate falls by 3 percent.f. The federal government increases purchases to stimulatethe economy.
Refer to Figure 11.1. All of the following events can cause a movement from Point E to Point A EXCEPT Group of answer choices an increase in real output and income. a decrease in the interest rate. an increase in the nominal aggregate output. an increase in the aggregate price level.
Question 2 Full explain this question
Homework: Chapter 09 PRICE LEVEL 140 135 130 125 120 115 110 105 100 0 Changes in a Self-Regulating Economy 1 AD2 SRAS AD₁ LRAS 6 2 3 4 5 REAL GDP (Trillions of dollars) 8 Suppose there is a sudden decrease in government purchases that causes a shift in aggregate demand from AD; to AD₂. As a classical economist from Langoria, you explain that the shift in aggregate demand creates . You also explain that will be affected in the short run. You note that such a gap leads to an unemployment rate that is to ▼ As wages change, the explain that in the long run, the natural unemployment rate. This means that wages are certain until Real GDP equals Natural Real GDP. Finally, you curve shifts to the will be affected. MacBook Pro X A-Z A+
Assume that the general level of prices increases. Which of the following best describes what happens to the money market, AE model and AD curve? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a We shift the AD curve to the left because the interest rate increases, the aggregate expenditures curve decreases and equilibrium Y decreases. We shift the AD curve to the right because the interest rate decreases, the aggregate expenditures curve increases and equilibrium Y increases. We move along the AD curve because the interest rate decreases, the aggregate expenditures curve increases and equilibrium Y increases. We move along the AD curve because the interest rate increases, the aggregate expenditures curve decreases and equilibrium Y decreases. σ
12
The real balance effect is the impact on real GDP caused by the ______ relationship between the price level and the real value of financial assets. A. Independent B. Direct C. Inverse D. Linear
Check which is CORRECT 1. As prices rise, the AS curve shifts to the left. 2.A fall in the money wage rate reduces aggregate supply and shifts the AS curve to the left. 3. A fall in the money wage rate increases aggregate supply and shifts the AS curve rightward 4. A fall in the money wage rate reduces aggregate demand and shifts AD to the left