Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 15.1, Problem 3ST
To determine
The monetarist transmission mechanism.
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Which of the following is a position held by monetarists?
Changes in the velocity of money are unpredictable.
Aggregate demand depends on money velocity but not on the money supply.
The economy is unstable; wages and prices are inflexible.
The short-run aggregate supply curve slopes upward.
Initially, the economy is in long-term equilibrium. Suppose there is an increase in velocity-that is, there is an increase in the average number of times
a dollar is spent to buy goods and services.
Show the long-run effect of this change according to the monetarist view, ceteris paribus, by dragging one or both curves on the graph below.
PRICE LEVEL
REAL GDP
SRAS
AD
AD
SRAS
Suppose that the money supply and the nominal GDP are 100 billion and 500 billion respectively. If the central bank reducess the money supply by 10 billion, by how much will nominal GDP have to fall to restore equilibrium, according to the monetarist perspective.
During a period of high inflation, a country's central bank decides to use a monetarist model, which focuses on controlling the money supply to stabilize prices. The bank implements policies to reduce the growth rate of the money supply, based on the theory that inflation is primarily caused by excessive growth in money supply. The main goal of adopting a monetarist approach in this case is to:A) Increase the money supplyB) Control inflation and stabilize the economyC) Decrease government spending and taxesD) Encourage rapid economic growth
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Chapter 15 Solutions
Macroeconomics
Ch. 15.1 - Prob. 1STCh. 15.1 - Prob. 2STCh. 15.1 - Prob. 3STCh. 15.4 - Prob. 1STCh. 15.4 - Prob. 2STCh. 15.4 - Prob. 3STCh. 15 - Prob. 1QPCh. 15 - Prob. 2QPCh. 15 - Prob. 3QPCh. 15 - Prob. 4QP
Ch. 15 - Prob. 5QPCh. 15 - Prob. 6QPCh. 15 - Prob. 7QPCh. 15 - Prob. 8QPCh. 15 - Prob. 9QPCh. 15 - Prob. 10QPCh. 15 - Prob. 11QPCh. 15 - Prob. 12QPCh. 15 - Prob. 13QPCh. 15 - Prob. 14QPCh. 15 - Prob. 15QPCh. 15 - Prob. 16QPCh. 15 - Prob. 17QPCh. 15 - Prob. 18QPCh. 15 - Prob. 1WNGCh. 15 - Prob. 2WNGCh. 15 - Prob. 3WNGCh. 15 - Prob. 4WNGCh. 15 - Prob. 5WNGCh. 15 - Graphically portray the Keynesian transmission...Ch. 15 - Prob. 7WNGCh. 15 - Prob. 8WNG
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Similar questions
- According to monetarists in the context of self-regulatory theory, if the economy is initially in long-run equilibrium, an increase in the money supply will _______ both the price level and real GDP in the short run but will ______ only _____ in the long run. Group of answer choices lower; lower; the price level raise; lower; price raise; raise; price raise; raise; real GDParrow_forwardWhat is the Unpleasant Monetarist Arithmetic? Were its predictions about the US economy correct? How do you know?arrow_forwardMonetarists differ from Classical economists in their view of money in that monetarists believe: (a) The velocity of money is relatively constant over time (b) Prices are not influenced by real GDP (c) Prices are not influenced by the money supply (d) The level of unemployment is directly related to the money supply (e) The velocity of money varies over timearrow_forward
- There are several ways that governments can increase or decrease the money supply. Match the descriptions with the corresponding policy tool. It's possible that a description does not apply to any of the policy tools. Open market operations Reserve requirement Discount rate Quantitative easing Answer Bank a central bank purchasing existing bond:s a government printing more currency a central bank purchasing a large quantity of longer-term Treasury bonds an increase in the percentage of deposits that banks must keep on hand an increase in the interest rate that a central bank charges commercial banks for loans an increase in government spendingarrow_forward“A monetarist investigator might say that the sewer flow of 6,000 gallons an hour consisted of an average of 200 gallons in the sewer at any one time with a complete turnover of the water 30 times every hour.” Interpret this statement using the equation of exchange.arrow_forwardList three main tools available to the Fed to change money supply in the economy. Which tool do you think is most commonly used?arrow_forward
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