![ECNS 202 PRINTOUT](https://www.bartleby.com/isbn_cover_images/9781337096584/9781337096584_largeCoverImage.jpg)
Relation between money supply and aggregate demand.
![Check Mark](/static/check-mark.png)
Answer to Problem 1CQQ
Option ‘b’ is correct.
Explanation of Solution
Option (b):
By the theory of liquidity preference, an increase in the money supply shifts the money supply curve to the right causing the equilibrium interest rate to decrease. This stimulates consumption and investment, thereby expanding aggregate
Option (a):
Increase in money supply shifts the money supply curve to the right, which lowers the interest rate. Thus, option ‘a’ is incorrect.
Option (c):
By the theory of liquidity preference, a decrease in money supply shifts the money supply curve to the left causing the equilibrium interest rate to increase. This reduces consumption and investment, thereby contracting aggregate demand. Thus, option ‘c’ is incorrect.
Option (d):
Decrease in money supply shifts the money supply curve to the left, which increases the interest rate. Thus, option ‘d’ is incorrect.
Concept introduction:
Aggregate demand (AD): Aggregate demand refers to the total value of the goods and services that are demanded at a particular price in a given period.
Money supply: Money supply refers to the total amount of monetary assets circulating in an economy during a particular period.
Want to see more full solutions like this?
- Answer question a, b, d, and earrow_forwardBzbsbsbdbdbdbdarrow_forwardRecent research indicates potential health benefits associated with coffee consumption, including a potential reduction in the incidence of liver disease. Simultaneously, new technology is being applied to coffee bean harvesting, leading to cost reductions in coffee production. How will these developmentsaffect the demand and supply of coffee? How will the equilibrium price and quantity of coffee change? Use both words and graphs to explain.arrow_forward
- Recent research indicates potential health benefits associated with coffee consumption, including a potential reduction in the incidence of liver disease. Simultaneously, new technology is being applied to coffee bean harvesting, leading to cost reductions in coffee production. How will these developmentsaffect the demand and supply of coffee? How will the equilibrium price and quantity of coffee change? Use both words and graphs to explain.arrow_forward► What are the 95% confidence intervals for the intercept and slope in this regression of college grade point average (GPA) on high school GPA? colGPA = 1.39 + .412 hsGPA (.33) (.094)arrow_forwardG Interpret the following estimated regression equations: wagehr = 0.5+ 2.5exper, where wagehr is the wage, measured in £/hour and exper is years of experience, colGPA = 1.39.412 hsGPA where colGPA is grade point average for a college student, and hsGPA is the grade point average they achieved in high school, cons 124.84 +0.853 inc where cons and inc are annual household consumption and income, both measured in dollars What is (i) the predicted hourly wage for someone with five years of experience? (ii) the predicted grade point average in college for a student whose grade point average in high school was 4.0, (iii) the predicted consumption when household income is $30000? =arrow_forward
- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, IncEssentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage LearningPrinciples of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
- Principles of Macroeconomics (MindTap Course List)EconomicsISBN:9781285165912Author:N. Gregory MankiwPublisher:Cengage LearningBrief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage LearningPrinciples of Economics, 7th Edition (MindTap Cou...EconomicsISBN:9781285165875Author:N. Gregory MankiwPublisher:Cengage Learning
![Text book image](https://www.bartleby.com/isbn_cover_images/9781544336329/9781544336329_smallCoverImage.jpg)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337091992/9781337091992_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781285165912/9781285165912_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337091985/9781337091985_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781285165875/9781285165875_smallCoverImage.gif)