MS, MS,MDМ, м,QUANTITYOF MONEYThe graph above shows a decrease in the moneysupply. Which of the following is consistent with thischange?Contractionary Fiscal Policy is used toreduce income and increase InflationContractionary Monetary Policy is used toincrease interest rates and decreaseInflationExpansionary Fiscal Policy is used todecrease income and decrease InflationExpansionary Monetary Policy is used tolower interest rates and decrease InflationNOMINAL* INTEREST RATE

A fiscal policy is used by the government to stabilize the economy and the tools are taxes and…

MS, MS, MD M2 M, QUANTITY OF MONEY The graph above shows a decrease in the money supply. Which of the following is consistent with this change? Contractionary Fiscal Policy is used to reduce income and increase Inflation Contractionary Monetary Policy is used to O increase interest rates and decrease Inflation Expansionary Fiscal Policy is used to decrease income and decrease Inflation Expansionary Monetary Policy is used to lower interest rates and decrease Inflation NOMINAL * INTEREST RATE

MS, MS, MD M2 M, QUANTITY OF MONEY The graph above shows a decrease in the money supply. Which of the following is consistent with this change? Contractionary Fiscal Policy is used to reduce income and increase Inflation Contractionary Monetary Policy is used to O increase interest rates and decrease Inflation Expansionary Fiscal Policy is used to decrease income and decrease Inflation Expansionary Monetary Policy is used to lower interest rates and decrease Inflation NOMINAL * INTEREST RATE

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. Money supply, money demand, and adjustment to monetary equilibrium The following table gives the quantity of money demanded at various price levels (P), the money demand schedule. In the following table, fill in the column labeled Value of Money. Quantity of Money Demanded Price Level (P) Value of Money (1/P) (Billions of dollars) 1.00 1.00 1.33 0.75 2.00 0.50 4.00 0.25 1.5 2.0 3.5 7.0 Now consider the relationship between the quantity of money that people demand and the price level. The lower the price level, the less required to complete transactions, and the less money people will want to hold in the form of currency or demand deposits. Assume that the Federal Reserve initially fixes the quantity of money supplied at $3.5 billion. Use the orange line (square symbol) to plot the initial money supply (MS₁) set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol) to graph the money demand curve. money
Explain the Fed's policy tools and briefly describe how each works. The Fed uses its policy tools to _______. A. regulate the amount of money circulating in the United States by printing enough money each year for the purchase of consumer goods and services B. influence the exchange rate and the country's trade balance by adjusting the interest rate C. keep the government budget debt under $20 trillion by adjusting loans to Congress D. influence the interest rate and regulate the amount of money circulating in the United States by adjusting the reserves of the banking system
Suppose that the money supply increases by 20 percent. If there is no inflation, what does the quantity theory of money tell us must happen to real GDP? It must increase by more than 20 percent. It must increase by less than 20 percent. It must increase by exactly 20 percent. None of the above are correct. Which of the following statements is true of the federal funds market? No banks are refused loans in the federal funds market. In the federal funds market, banks with a shortage of reserves borrow funds, while banks with an excess of reserves lend them out. The interbank lending system works more efficiently in periods of financial panic than in periods of financial stability. Although the federal funds market aims to provide liquidity to needy banks, it is not very popular as overnight loans are logistically inefficient for large banks. On a graph with real GDP growth on the x-axis and the unemployment rate on the y-axis, you plot each year's values for the United States as…
The graph shows the demand for money curve and the supply of money curve. The Fed decreases the quantity of real money supplied to $3.9 trillion. Draw a new MS curve that shows the effect of the Fed's action. Label it. Draw a point at the new equilibrium quantity of money and interest rate. Before the Fed decreases the quantity of money, the equilibrium interest rate is percent a year. After the Fed decreases the quantity of money, at an interest rate of 4 percent a year, people want to hold money than the quantity supplied, so they bonds. A. more; sell B. less; buy C. less; sell D. more; buy The price of a bond A. falls; falls O B. rises; falls and the interest rate 8- 7- 6- 5- 4- 3- 2- 1- Nominal interest rate (percent per year) 4 0+ 3.8 MS 4.0 MD 4.0 4.1 3.9 Quantity of money (trillions of 2009 dollars) >>> Draw only the objects specified in the questi 4.2
The following graph shows the money market in a hypothetical economy. The central bank in this economy is called the Fed. Assume that the Fed fixes the quantity of money supplied. Suppose the price level increases from 150 to 175. Shift the appropriate curve on the graph to show the impact of an increase in the overall price level on the market for money. INTEREST RATE (Percent) 18 15 12 60 3 0 0 15 Money Supply Money Demand 30 45 60 MONEY (Billions of dollars) 75 90 Money Demand Money Supply (?) After the increase in the price level, the quantity of money demanded at the initial interest rate of 9% will be supplied by the Fed at this interest rate. People will try to other interest-bearing assets, and bond issuers will find that they equilibrium at an interest rate of % than the quantity of money bonds and interest rates until the money market reaches its new their money holdings. In order to do so, people will
What was the actual federal funds rate set by the Fed in 2021? Was monetary policy expansionary or contractionary? Briefly explain.
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Which of the following are the four influences on the demand for money? (Check all that apply) A. Money Supply B. Inflation C. Income D. Interest Rates E. Credit Availability