If money supply increases 10%, and we assume a constant money velocity: O We should have a price increase of 10% in the short-run, and an output increase of 10% in the long-run. We don't have enough data to answer. O Price and output increase by 10% in the long-run. Price and output increase by 5% in the long-run. O We should have an output increase of 10% in the short-run, and a price increase of 10% in the long-run.

If money supply increases 10%, and we assume a constant money velocity: O We should have a price increase of 10% in the short-run, and an output increase of 10% in the long-run. We don't have enough data to answer. O Price and output increase by 10% in the long-run. Price and output increase by 5% in the long-run. O We should have an output increase of 10% in the short-run, and a price increase of 10% in the long-run.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which set of actions could the central bank use to increase the money supply? Select one: O a. an open market purchase and a tax cut O b. a discount rate cut and an open market sale O c.a reduction in the required reserve ratio and an open market purchase O d. a reduction in the required reserve ratio and an open market sale
Suppose the Fed buys $1 million of bonds from theFirst National Bank. If the First National Bank and allother banks use the resulting increase in reserves topurchase securities only and not to make loans, whatwill happen to checkable deposits?
Which of the following is a policy tool of the Federal Reserve that it actively uses to control the monetary base and conduct monetary policy? All of the other answers are correct. O Open market operations O Setting the reserve requirement O Setting the discount rate
Question 3 In the market for reserves, suppose that the federal funds rate and discount rate are both at 7%. If the Federal Reserve Bank sells securities in the open market, then the equilibrium rate for reserves will and the amount of borrowed reserves will O not change; decrease O not change; increase O rise; increase O rise; decrease Question 4 When the Federal Reserve Bank lowers the reserve requirements for commercial banks in the economy, this causes the curve for reserves to decrease and so the curve shifts to the ----- O demand; right O demand: left O supply; right O supply; left
Moving to another question will save this response. Velocity of Money is V=(PXY)/M O V=(YXM)/M V=(PXY)/Y O V-Money/(PXY) A L A Moving to another question will save this response. bike 2.jpg bike.jpg 101°F Sunny Question 3 4. H OL
In the short run, if the central bank decreases the money supply, the currency will and output will O appreciate; rise O appreciate; fall O depreciate; rise O depreciate; fall
By using open market operations, the Federal Reserve O a. adjusts the supply AND demand of reserves to keep the federal funds interest rate equal to its target. O b. adjusts the supply of reserves to keep the federal funds interest rate equal to its target. Oc controls banks' demand for reserves, thereby keeping the federal funds rate equal to its target. O d. adjusts the demand of reserves to keep bank rates in line with the federal funds rate target. O e. None of these answers is correct.
The money stock measured as M1 is growing at the rate of 5% per year. If real GDP is growing at 2% per year, and the income velocity of circulation of money is constant, Select one: the economy will achieve noninflationary growth O b. the inflation rate will be around 1%. O c. the inflation rate will be around 5% O d. the inflation rate will be around 3%.
Which of the following would NOT result in a decreased money supply? Select one: O a. Decrease in the reserve ratio b. Increase in the currency ratio Decrease in the money multiplier d. Decrease in the monetary base C.
Which of the following is NOT a function of money? O a. A unit of account O b. A store of value O c. An interest-earning asset O d. A medium of exchange
In a regime of abundant reserves, the highest possible level of the fed funds rate that is on the demand curve for reserves is determined by A. the rate of interest on reserve balances, IORB. O B. the primary credit discount rate. OC. the interest rate on three-month Treasury bills. D. the prime interest rate. In a regime of abundant reserves, the lowest possible level of the fed funds rate that is on the demand curve for reserves is determined by OA. the primary credit discount rate. OB. the rate of interest on reserve balances, IORB. O C. the prime interest rate
Assume that a bank receives a deposit of $1,000 in cash, puts aside $200 as required reserves, and makes a loan of $800, these transactions imply that: O the money supply by the whole banking system can increase by $1,000. O the money supply by the whole banking system can increase by $4,000. the money supply by the whole banking system can increase by $8,000. O the money supply by the whole banking system can increase by $5,000.