When the economy is in a liquidity trap, expansionary monetary policy is ineffective with respect to income because Select one: O a. the public is willing to hold any amount of money being offered at the current rate of interest. O b. the public already holds all the money they want. O c. investment is insensitive to changes in the rate of interest. O d. the real demand for money is insensitive to changes in the rate of interest.

When the economy is in a liquidity trap, expansionary monetary policy is ineffective with respect to income because Select one: O a. the public is willing to hold any amount of money being offered at the current rate of interest. O b. the public already holds all the money they want. O c. investment is insensitive to changes in the rate of interest. O d. the real demand for money is insensitive to changes in the rate of interest.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Money Growth And Inflation

Section: Chapter Questions

Problem 1PA

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Suppose that the reserve requirement for checkingdeposits is 10 percent and that banks do not hold anyexcess reserves.a. If the Fed sells $1 million of government bonds,what is the effect on the economy’s reserves andmoney supply?b. Now suppose that the Fed lowers the reserverequirement to 5 percent but that banks chooseto hold another 5 percent of deposits as excessreserves. Why might banks do so? What is theoverall change in the money multiplier and themoney supply as a result of these actions?
Assume, in the 3rd quarter of 2018 in the U.S., the velocity of money was 3.08 and the M2 money supply was $1,050 million. The average prices in the economy was $1.44. Based on this, what was the real GDP of the U.S. in the 3rd quarter of 2018. O a. $2,750 million O b.$1,250 millon Oc. $2,000 million O d. 52.250 million
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Assume, in the 3rd quarter of 2018 in the U.S., the velocity of money was 3.08 and the M2 money supply was $1,050 million. The average prices in the economy was $1.44. Based on this, what was the real GDP of the U.S. in the 3rd quarter of 2018. O a. $2,750 million Ob. $1,250 million O C. $2,000 million O d. 52.250 million
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