Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 34, Problem 1QCMC
To determine
Relation between money supply and aggregate demand.
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Give typing answer with explanation and conclusion
What is the effect of a rise in the U.S. price level on the buying power of money?
The buying power of money _______.
A.
increases and aggregate demand increases
B.
increases and the quantity of real GDP demanded increases
C.
decreases and the quantity of real GDP demanded decreases
D.
decreases and aggregate demand decreases
Interest rates fall as the supply of money increases because a.businesses want to borrow more when the money supply
increases. b. Aggregate demand increases. c. The demand curve for money slopes down. d. The demand curve for
money shifts to the right.
Chapter 34 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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- Money market equilibrium depends on what the central bank targets. How does the money market adjust to the equilibrium? If the central bank targets _______. A. the short-term interest rate, the quantity of money demanded adjusts B. the quantity of money demanded, the short-term interest rate adjusts C. the monetary base, the quantity of money supplied adjusts D. the quantity of money, the short-term interest rate adjustsarrow_forwardWhich of the following is correct? The demand for money *a. increases as real GDP increases.b. increases when the interest rate increases.c. depends on the quantity of money.d. decreases as the price level increasesarrow_forwarda) Explain what happens to Money Demand when each of the following occurs: i, incomes rise; ii. the interest rate rises. b. Use the money market to explain why the aggregate demand curve slopes downward.arrow_forward
- Read the event The Federal Reserve raises reserve requirements. What would likely result from this event? A. An economy would see a slight decrease in aggregate demand. B. Interest rates on loans decline. C. Consumer demand would increase thus increasing prices. D. Inflation would reach levels that are acceptable for full employment.arrow_forwardIf an economy is operating at full employment and there is a substantial increase in the money supply, which of the following is most likely to happen? A. Inflation increases B. Interest rates increase C. Real GDP increases D. Unemployment increasesarrow_forwardIn an economy where the central bank implements negative interest rates as a monetary policy tool, what is the most likely short-term impact on consumer savings behavior and bank profitability? A. An increase in consumer savings as people seek to safeguard their money and a rise in bank profitability due to increased lending. B. A decrease in consumer savings as the incentive to save diminishes and a decrease in bank profitability due to lower interest margins. C. No significant change in consumer savings behavior but an improvement in bank profitability due to lower borrowing costs. D. A shift in consumer investment towards riskier assets and challenges in bank profitability due to compressed interest margins. Please don't use chatgpt it is giving wrong answer and please provide valuable answerarrow_forward
- if the fed raise the reserve requirment on deposit from 15% to 20%, what would happen to the money supply? a. it would increase b. it would remain unchanged c, it depends on the value of interest rates d, it would decreasearrow_forwardWhen the Fed sells government securities (bonds), the money supply will ______ . a. first increase and then decrease b. first decrease and then increase c. increase d. decreasearrow_forwardWhat does the interest rate effect say? a. Interest rates causes inflation to go down b. Interest rates causes aggregate demand to have an upward slope c. as prices go up, interest rates will control inflation and prevent it from increasing d. when prices for outputs rise, the same purchases will take more money or credit to accomplisharrow_forward
- If the Fed increases the money supply, in the short run interest rates will ________ and investment spending will __________. Rise; go down Decline; go down Rise; increase Decline; increasearrow_forwardThe Central Bank of Colombia required banks to decrease their cash reserve ratio. What will be its effect? a.Decrease in the aggregate supply b.Increase in money supply available for loans c.Increase in the aggregate supply d.Decrease in money supply available for loansarrow_forwardImagearrow_forward
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