Consider a central bank that chooses to implement its monetary policy by expanding the money supply by a fixed percentage amount in every year. One important disadvantage with this approach to monetary policy is that it may.. O a. Create a recessionary output gap. O b. Be destabilising if the demand for money is unstable. O c. Be inconsistent with the Bank of Canada Act. O d. Lead to sustained inflation. O e. Lead to stable growth of national income.

Consider a central bank that chooses to implement its monetary policy by expanding the money supply by a fixed percentage amount in every year. One important disadvantage with this approach to monetary policy is that it may.. O a. Create a recessionary output gap. O b. Be destabilising if the demand for money is unstable. O c. Be inconsistent with the Bank of Canada Act. O d. Lead to sustained inflation. O e. Lead to stable growth of national income.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume contractionary monetary policies have had the effect of lowering inflation rates from a 6% annual rate down to 2%. What do economists call this drop in inflation? O a. Deflation. O b. Inflation. O c. Devaluation. d. Depreciation. O e. Disinflation.
Suppose two countries have identical aggregate demandcurves and potential levels of output, and g is the samein both countries. Assume that in 2019, both countriesare hit with the same negative supply shock. Given thetable of values below for inflation in each country, whatcan you say, if anything, about the credibility of eachcountry’s central bank? Explain your answer.Country A Country B2018 3.0% 3.0%2019 3.8% 5.5%2020 3.5% 5.0%2021 3.2% 4.3%2022 3.0% 3.8%
Assume that the current demand for goods depends on expectations in the IS-LM model. A monetary contraction in the current period will cause a leftward shift in the IS curve if: O O current and expected future real interest rates are positively related current and expected future real interest rates are negatively related monetary policy cannot affect, directly or indirectly, the position of the IS curve in the current period the central bank is expected to reverse any current movements in monetary policy in the future current and expected future real interest rates are unrelated
Consider the strength of monetary forces. The effectiveness of monetary policy in bringing about changes in real GDP is enhanced when the OA. investment demand curve and money demand function are both relatively flat. OB. investment demand curve and money demand function are both relatively steep. C. investment demand curve is relatively steep and the money demand function is relatively flat. OD. investment demand curve is relatively flat and the money demand function is relatively steep. OE. None of the above-monetary policy is always equally effective.
. How does monetary policy affect aggregate demand? a) By influencing consumer spending only b) By influencing investment spending only c) By influencing both consumer and investment spending d) By influencing government spending only -. A central bank uses contractionary monetary policy to: a) Combat deflation
Trevor goes to the ATM machine and withdraws $500 in cash. How will this affect the monetary base? Select one: O a. The monetary base will decline as bank reserves fall. O b. The monetary base will increase with the increase in currency in circulation. O c. The monetary base will increase by less than the size of the withdrawal as the increase in the currency in circulation will not be completely offset by a decrease in bank reserves. O d. The monetary base will remain unchanged with the increase in the currency in circulation being exactly offset by a decrease in bank reserves.
indicates that, in the long run, if the money supply increases at a slower rate than real GDP, there will be _ in the price level. Select one: O A. The equation of exchange; an increase O B. The quantity theory of money; an increase O . The equation of exchange; a decrease O D. The quantity theory of money; a decrease
Which of the following statements about money that is correct? O A. In the United States today, money consists of currency and deposits at banks and other depository institutions. O B. Money is a completely stable store of value. OC. Credit cards and debit cards are examples of money. O D. Inflation brings a rising value of money.
Consider a situation where the central bank increases the money supply. All other things being equal, if nominal GDP increased by $800 billion during a time when velocity was 4, by how much did the central bank increase the money supply? O $200 million $400 billion $400 million $200 billion
The phrase that inflation is a "monetary phenomenon" means... O a. Increases in the price level are always associated with increases in the money supply. O b. Only an increase in the money supply can start a period of inflation. Oc A continuous rise in prices is possible only with C. continuing increases in the money supply. O d. Repeated supply shocks cannot drive up prices if there is no monetary validation. O e The price level cannot rise without an increase in the money supply.
In regard to monetary policies, nonactivists have various proposals. True or False: Some nonactivists believe in a predetermined-money growth rate, which suggests that the monetary authorities should target the proper federal funds rate before implementing monetary policies. O True O False Which of the following statements best explains the difference between the Taylor rule and the two other nonactivist rules (the constant-money growth rate rule and the predetermined-money growth rate rule)? O The Taylor rule does not take into account the stability of prices. O The Taylor rule is not a derivation of the equation of exchange. O The Taylor rule suggests how much the money supply should grow. O The Taylor rule does not take into account the current state of the economy.
A period of inflation can be stopped by O A. increasing the growth rate of real output, to absorb consumer spending. O B. decreasing the money supply. O C. decreasing the interest rate, which causes aggregate demand to increase. O D. Answers A, B, and C all are correct. O E. None of the answers are correct.