Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
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
- The Fed wants to decrease the money supply when the economy is booming and inflationary pressures ________ in the economy.arrow_forwardRead 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_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_forwardIf the central bank wa nts to expand aggregate demand, it ca n ___ the money supply, whichwould the interest rate.a. increase, increaseb. increase, decreasec. decrease, increased. decrease, 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_forward
- If the economy is operating at potential GDP and increase in money supply will lead to_______?arrow_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_forwardIf 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_forward
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