Consider the historical debate between Keynesians and Monetarists regarding the effectiveness of monetary policy in changing real GDP. A change in the money supply would have no short-run effect on real GDP when OA. the money demand curve is vertical. OB. the money supply curve is horizontal. C. the money demand curve is horizontal. O D. the money supply curve is vertical. Interest rate Interest rate MM (i) Changes in the money supply effective .MD Quanti Money MAM Quantity of money Interest rate (ii) Changes in the money supply ineffective .MD Interest rate Investment 11 Investment D

Consider the historical debate between Keynesians and Monetarists regarding the effectiveness of monetary policy in changing real GDP. A change in the money supply would have no short-run effect on real GDP when OA. the money demand curve is vertical. OB. the money supply curve is horizontal. C. the money demand curve is horizontal. O D. the money supply curve is vertical. Interest rate Interest rate MM (i) Changes in the money supply effective .MD Quanti Money MAM Quantity of money Interest rate (ii) Changes in the money supply ineffective .MD Interest rate Investment 11 Investment D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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What are the immediate effects and the long-run effects if the Fed changes the quantity of money? If the Fed changes the quantity of money, the immediate effects are on and the long-run effects are on O A. the short-term nominal interest rate; the price level and the inflation rate B. the price level; the real interest rate and the inflation rate C. the inflation rate; the long-run nominal interest rate and the real interest rate D. the price level; the inflation rate
The quantity theory of money begins with the equation of exchange, MV = PY, and then adds the assumptions that Select one: A. velocity and potential GDP are independent of the quantity of money. B. potential GDP and the price level are independent of the quantity of money. C. velocity and the price level are independent of the quantity of money. D. potential GDP and the quantity of money are independent of the price level. O E. velocity varies inversely with the interest rate, and the price level is independent of the quantity of money.
Assume, in the 3rd quarter of 2018 in the U.S., the velocity of money was 3.08 and the M2 money supply was $1,050 million. The average prices in the economy was $1.44. Based on this, what was the real GDP of the U.S. in the 3rd quarter of 2018. O a. $2,750 million O b.$1,250 millon Oc. $2,000 million O d. 52.250 million
If the Federal Reserve decided to increase interest rates, it could O a. buy bonds to raise the money supply. Ob. sell bonds to lower the money supply. Oc. buy bonds to lower the money supply. Od. sell bonds to raise the money supply.
When households and firms start selling off their bonds, which of the following will be the result? a. The market price of bonds increases. O b. The money demand curve shifts leftward. C. The nominal interest rate falls. O d. The nominal interest rate rises. е. The money supply curve shifts leftward.
. What is the opportunity cost of holding money? How is k related to the velocity of money? s. Use the Quantity Theory of Money to explain how long run inflation occurs. If the Federal Reserve Bank wishes to keep the inflation rate at zero percent, at what rate should the money supply grow? Why?
Money demand in an economy in which no interest is paid on money is Md p == 500 + 0.2Y - 1000i. a. Suppose that P = 100, Y = 1000, and i = 0.10. Find real money demand, nominal money demand, and velocity. b. The price level doubles from P = 100 to P = 200. Find real money demand, nominal money demand, and velocity.
In the country of Juventus, the money supply is equal to $52 (bilion), the velocity of circulation is 5, and real GDP is $100 (bilion) a. What is the price level in Juventus, and what is the valur of its nominal GDP? Round your price level to 2 decimal places Price level Nominal GDP b. If money supply increases by 20 percent, what will be the new values of the price level and nominal GDP, assuming that Vand real GDP remain constant? Round your price level to 2 decmal olaces Price levet Nominal GDP c What does this suggest about the connection between money supply atnd price level? The relationship between money supply and price level in this case is Cick to select)
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2. Inflation can cause increased wealth inequality through the Cantillion Effect. Es-sentially, this means that expansionary monetary policy benefits those who are initially given new money (usually those who are rich and well-connected), while the rest of the population suffers the effects of inflation. Using the quantity theory of money, explain why this is the case.