Consider the market for money in the liquidity preference framework. If the Bank of Canada decreases moneysupply, and at the same time contracting economy pushes people's incomes down, then:Select one:А.the equilibrium interest rate will increase, the change in the equilibrium quantity of money will be ambiguous.В.the change in the equilibrium interest rate will be ambiguous, the equilibrium quantity of money will decrease.С.both the equilibrium interest rate and the equilibrium quantity of money will increase.O D.both the equilibrium interest rate and the equilibrium quantity of money will decrease.

All else being equivalent, a greater cash supply brings down market rate of interest, making it more…

Consider the market for money in the liquidity preference framework. If the Bank of Canada decreases money supply, and at the same time contracting economy pushes people's incomes down, then: Select one: А. the equilibrium interest rate will increase, the change in the equilibrium quantity of money will be ambiguous. O B. the change in the equilibrium interest rate will be ambiguous, the equilibrium quantity of money will decrease. С. both the equilibrium interest rate and the equilibrium quantity of money will increase. D. both the equilibrium interest rate and the equilibrium quantity of money will decrease.

Consider the market for money in the liquidity preference framework. If the Bank of Canada decreases money supply, and at the same time contracting economy pushes people's incomes down, then: Select one: А. the equilibrium interest rate will increase, the change in the equilibrium quantity of money will be ambiguous. O B. the change in the equilibrium interest rate will be ambiguous, the equilibrium quantity of money will decrease. С. both the equilibrium interest rate and the equilibrium quantity of money will increase. D. both the equilibrium interest rate and the equilibrium quantity of money will decrease.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The Fed purchases $1 million of U.S. government securities from First Bank. The required reserve ratio is 10 percent, the currency-deposit ratio is 5 percent, and banks loan all excess reserves. The total increase in monetary base is _____ and the total increase in money supply (M1) is _____. O. $1 million; $3 millionO. $3 million; $1 milionO. $1million; $7 millionO. $7 million: $1 million
90 Figure 11-1 of Value of Maney MS1 MS2 lag Meney Dem and 1 C D Quantity of Man ey Refer to the Figure 11-1. What happens when the money supply curve shifts from MS, to MS,? Select one: a. The economy's ability to produce goods and services increases. b. The demand for goods and services decreases. c. The equilibrium value of money increases. d. The equilibrium price level increases. 2.
M11
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QUESTION 48 An increase in the money supply causes: O a. interest rates to rise, investment spending to rise, and aggregate demand to rise O b. interest rates to rise, investment spending to fall, and aggregate demand to fall O c. interest rates to fall, investment spending to fall, and aggregate demand to fall O d. interest rates to fall, investment spending to rise, and aggregate demand to rise
4. Which of the following characteristics of money is associated with the base good being divisible? a. Unit of account b. Store of value c. Medium of exchange 5. Which of the following characteristics of money is associated with the base good being easily portable? a. Unit of account b. Store of value c. Medium of exchange 6. The Federal Reserve's dual mandate is that monetary policy should accomplish An effective allocation of capital and stable property rights b. A well-capitalized banking system and an empowered democracy c. A stable return on the stock market and reasonable bond yields d. Price stability and full employment а.
a. Prove that money supply equation in an economy is given by, M={(cr + 1) / (cr + rr)}B b. State the determinants of money supply. c. Given that the currency deposit ratio is 0.1 and reserve deposit ratio is 0.01, by how much would money supply increase if the monetary base rises to Gh¢ 200,000.
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If the money supply is $60 billion, the velocity of money is 7, and real GDP is $280 billion, then the price level equals: O 0.67. A.1.50. B.4.67. C.28. D. 1.25. E. 2.5
48
Consider an economy where the monetary base is equal to $3,500 million. People hold onequarter (1/4th ) of their money in the form of currency and the remainder as bank deposits. Banks have a reserve-deposit ratio of 0.25 . a. What is the nation's money supply equal to? b. One day, COVID emerges as a public health emergency and people are forced to stay at home. As a result, people now hold only 1/8th of their money in the form of currency (and the remainder as bank deposits.) If banks maintain their reserve-deposit ratio of 0.25 and central bank does nothing, what is the new money supply? c. If, in the face of this crisis, the central bank wants to conduct an open market operation to keep the money supply at its original level, does it buy or sell government bonds? Calculate, in dollars, how much the central bank needs to buy/sell.