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quantity theory of money
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equation of exchange
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- On which of the following do monetarists and Keynesians disagree? A. Deflation causes unemployment B. Wages are sticky C. High inflation leads to misallocation of resources D. In the short run, an increase in the money supply boosts economic output E. C and DCompare the Keynesian and Monetarists theories. Describe why they disagree with each other over how the money supply affects the economy. Use examples.According to Monetarists, what should the government do if unemployment is 4% and inflation is 12%? Select one: a. Decrease the supply of money b. Decrease government spending c. Raise taxes d. Do nothing e. Lower interest rates
- In recent discussion, attention was devoted to the role of the central bank, the quantity theory of money, and the relationship between the money supply and inflation. Please answer the following two questions: A. One of my favorite economists, Milton Friedman, is attributed with the quote: "Inflation is everywhere and always a monetary phenomenon." Explain its meaning, relate it to the quantity theory of money, and explain the quantity theory of money. B. Why might it be in the federal government's benefit to generate inflation?What is the main argument for having a Central Bank independent from the government for the purposes of monetary policy? Select one: a. An independent Central Bank would have more resources available to devote towards implementing monetary policy b. An independent Central Bank would be more knowledgeable about the state of the economy. Consequently, the Central Bank would be better suited to implementing monetary policy c. The Central Bank is more credible in its inflation and cash rate targets. Consequently, inflation expectations will adjust appropriately to monetary policy announcements d. Having an independent Central Bank prevents any economic trade-offs when making monetary policy choicesWhich of the following is consistent with the monetarist view? Select one: A. A reduction in taxes will leave the value of real output unaffected B. Interest rates may be affected by increases in G or reductions in T C. Changes in M may cause changes in P in the long run. D. Monetary policy should be used to correct a shortfall in real output
- What is the expected impact of a decline in the money supply to the US economy? A. Higher aggregate prices (inflation) B. Lower aggregate prices (deflation) C. There is no general relationship between the money supply and inflaton“Monetary policy is the macroeconomic policy laid down by the central bank of an economy.”In terms of the above statement, explain how monetary policy can be used to combat inflationWhich is of the following is not a belief of monetarists? a.In the long-run, inflation is always a monetary phenomenon b.In the short-run, Fiscal policy is a better instrument of stabilization policy than monetary policy c.In the short-run, velocity is stable d.In the long-run, a ten percent increase in the money supply results in a ten percent increase in prices Early Keynesian thinks that money is less important because a.High interest elasticity of investment b.People have less incentive to buy bonds c.Fiscal Policy is more effective as it is determined by the politicians d.High interest elasticity of money demand If a country’s policy makers were to continuously use expansionary monetary policy in an attempt to hold unemployment below the natural rate the long-run result would be? a.All of these answers b.A decrease in the unemployment rate c.An increase in the level of output d.An increase in the rate of inflation The original Phillips curve…
- Economics urgent!! This country is witnessing a recession. The Chief economist in the government of this country decides that in order to increase the rate of economic growth of the country they need to increase the money injected into the economy. Graph the implications of this money increase on: a. The money demand and money supply in the short, and b. The money market in the long-run, and c. The inflation rate. Label your axes and explain your answers.In contrast to the classical school of economists John Maynard Keynes has a different view of people's behavior in holding money. Explain how the theory of money demand according to John Maynard Keynes!a.What happens to the aggregate demand? b.What happens to the level of output? c.What happens to the price level? d. State your conclusion on the effect of the monetary policy made by the BSP.
