Suppose that initially the money supply is $1 trillion, the price level equals 3, the real GDP is $5 trillon in base-year donars, and income velocity of money is 15. Then the money supply increases by $100 billion, while real GDP and income velocity of money remain unchanged. a. According to the quantity theory of money andprices, calculate the new price level after the increase in money supply::

Suppose that initially the money supply is $1 trillion, the price level equals 3, the real GDP is $5 trillon in base-year donars, and income velocity of money is 15. Then the money supply increases by $100 billion, while real GDP and income velocity of money remain unchanged. a. According to the quantity theory of money andprices, calculate the new price level after the increase in money supply::

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Figure 1, Money Supply and Money Demand Money Supply. MS, Money Supply. MS Value of money, 1/P 1/P1 1/P2 MD Quantity of Money, M (billions of dollars) S900 S950 Ceteris paribus, if the Fed increases the money supply from MS1 to MS2, as indicated in the diagram above, it follows that, in the short run, there will be pressure on the price level, and pressure on nominal interest rates. Select one: O a. upward; upward O b. downward; upward O c. upward, downward O d. downward; downward
Rate of interest (%) 16 14 12 10 00 6. 4 2 0 40 80 B 120 160 200 Quantity of investment 144 240 280
The demand for money increases and the demand for money curve shifts rightward if a. the price level falls. b. the nominal interest rate increases. the real interest rate increases. O C. O d. the inflation rate increases. O e. real GDP increases.
What is the demand for money? When the nominal interest rate rises, does the opportunity cost of holding money increase or decrease? Does the quantity of money demanded increase or decrease? The demand for money is the relationship between the quantity of money demanded and the _______ when all other influences on the amount of money that people wish to hold remain the same. A. price of bonds B. real interest rate C. inflation rate D. nominal interest rate When the nominal interest rate rises, the opportunity cost of holding money _______ and the quantity of money demanded _______. A. falls; increases B. rises; decreases C. falls; decreases D. rises; increases
Which of the following statements is correct? a. A fall in the rate of interest will shift both the asset demand and the total demand curves to the right. b. A fall in real GDP will shift both the transactions demand and the total money demand curve to the right. c. A decline in real GDP will shift the transactions demand curve to the left but leave the total money demand curve unchanged. d. An increase in prices will shift the transactions demand curve for money to the right but leave the total money demand curve unchanged. e. A decrease in prices will shift both the transactions demand and the total money demand curves to the left.
This question asks how the money market graph is affected by a specific event. Note that the money market graph is the graph with the money supply and money demand curves If regulation is passed that makes it more difficult for consumers to withdraw money from existing savings accounts. then how is the money market graph affected? a. increase in equilibrium interest rates, and increase in the equilibrium quantity of money O b. decrease in equilibrium interest rates, and decrease in the equilibrium quantity of money O c. decrease in equilibrium interest rates, and increase in the equilibrium quantity of money Od increase in equilibrium interest rates, and decrease in the equilibrium quantity of money O e no change in equilibrium interest rates, and no change in the equilibrium quantity of money
I would like to ask how to calculate c and d
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Ceteris paribus, if the Fed was targeting the quantity of money supplied and money demand increased, the Fed would likely If the Fed was instead targeting interest rates and money demand increased, the Fed would likely O increase the money supply: decrease the money supply decrease the money supply: do nothing O increase the money supply: do nothing do nothing: increase the money supply do nothing: decrease the money supply
Figure 31-3 On the following graph, MS represents the money supply and MD represents money demand. VALUE OF MONEY 0.6 0.45 5000 MS. MS. 9000 QUANTITY OF MONEY MO Refer to Figure 31-3. At the end of the first year, the relevant money-supply curve was the one labeled MS]. At the end of the second year, the relevant money-supply curve was the one labeled MS2. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for the second year? 8.3 percent -33 percent 33 percent -25 percent
When the money market is drawn with the value of money on the vertical axis, an increase in the money supply shifts the money supply curve to the a) right, lowering the price level. b) left, raising the price level. c) right, raising the price level. d) lefi, lowering the price level.
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