Time taken for the monetary policy to influence aggregate demand .

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 36, Problem 1CQQ

To determine

Time taken for the monetary policy to influence aggregate demand.

Expert Solution & Answer

Answer to Problem 1CQQ

Option ‘b’ is correct.

Explanation of Solution

Option (b):

Many studies suggest that it takes at least 6 months for the monetary policy to have an effect on aggregate demand. Monetary policy affects aggregate demand primarily by changing interest rates. However, mostly households and firms set their spending plans in advance; as a result, there is a time lag for changes in interest rate to alter the aggregate demand for goods and services Thus, option ‘b’ is correct.

Option (a):

Monetary policy works with a lag and hence, one month is insufficient for the monetary policy to reflect changes in the economy. Thus, option ‘a’ is incorrect.

Option (c):

Long lags suggest a policy that is passive rather than active, and such long gaps have an opposite effect on the economy (destabilization) as the economic conditions change from time to time. Two years is a long lag and thus, option ‘c’ is incorrect.

Option (d):

Long lags suggest a policy that is passive rather than active and such long gaps have an opposite effect on the economy (destabilization) as the economic conditions change from time to time. Five years is a really long lag and thus,option‘d’ is incorrect.

Economics Concept Introduction

Concept introduction:

Monetary policy: It refers to the credit control system adopted by the central bank of a country with an aim to achieve its macroeconomic policy objectives.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

profit maximizing and loss minamization fire dragon co mindtap

Problem 3 You are given the following demand for European luxury automobiles: Q=1,000 P-0.5.2/1.6 where P-Price of European luxury cars PA = Price of American luxury cars P, Price of Japanese luxury cars I= Annual income of car buyers Assume that each of the coefficients is statistically significant (i.e., that they passed the t-test). On the basis of the information given, answer the following questions 1. Comment on the degree of substitutability between European and American luxury cars and between European and Japanese luxury cars. Explain some possible reasons for the results in the equation. 2. Comment on the coefficient for the income variable. Is this result what you would expect? Explain. 3. Comment on the coefficient of the European car price variable. Is that what you would expect? Explain.

Problem 2: A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q=+15,000-2.80P+150A+0.3P+0.35Pm+0.2Pc (5,234) (1.29) (175) (0.12) (0.17) (0.13) R²=0.68 SER 786 F=21.25 The variables and their assumed values are P = Price of basic model = 7,000 Q==Quantity A = Advertising expenditures (in thousands) = 52 P = Average price of a personal computer = 4,000 P. Average price of a minicomputer = 15,000 Pe Average price of a leading competitor's workstation = 8,000 1. Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies? 2. Conduct a t-test for the statistical significance of each variable. In each case, state whether a one-tail or two-tail test is required. What difference, if any, does it make to…

Answer 2

Question

Chapter 36, Problem 1CQQ

To determine

Time taken for the monetary policy to influence aggregate demand.

Expert Solution & Answer

Answer to Problem 1CQQ

Option ‘b’ is correct.

Explanation of Solution

Option (b):

Many studies suggest that it takes at least 6 months for the monetary policy to have an effect on aggregate demand. Monetary policy affects aggregate demand primarily by changing interest rates. However, mostly households and firms set their spending plans in advance; as a result, there is a time lag for changes in interest rate to alter the aggregate demand for goods and services Thus, option ‘b’ is correct.

Option (a):

Monetary policy works with a lag and hence, one month is insufficient for the monetary policy to reflect changes in the economy. Thus, option ‘a’ is incorrect.

Option (c):

Long lags suggest a policy that is passive rather than active, and such long gaps have an opposite effect on the economy (destabilization) as the economic conditions change from time to time. Two years is a long lag and thus, option ‘c’ is incorrect.

Option (d):

Long lags suggest a policy that is passive rather than active and such long gaps have an opposite effect on the economy (destabilization) as the economic conditions change from time to time. Five years is a really long lag and thus,option‘d’ is incorrect.

Economics Concept Introduction

Concept introduction:

Monetary policy: It refers to the credit control system adopted by the central bank of a country with an aim to achieve its macroeconomic policy objectives.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 36, Problem 1CQQ

To determine

Time taken for the monetary policy to influence aggregate demand.

Expert Solution & Answer

Answer to Problem 1CQQ

Option ‘b’ is correct.

Explanation of Solution

Option (b):

Many studies suggest that it takes at least 6 months for the monetary policy to have an effect on aggregate demand. Monetary policy affects aggregate demand primarily by changing interest rates. However, mostly households and firms set their spending plans in advance; as a result, there is a time lag for changes in interest rate to alter the aggregate demand for goods and services Thus, option ‘b’ is correct.

Option (a):

Monetary policy works with a lag and hence, one month is insufficient for the monetary policy to reflect changes in the economy. Thus, option ‘a’ is incorrect.

Option (c):

Long lags suggest a policy that is passive rather than active, and such long gaps have an opposite effect on the economy (destabilization) as the economic conditions change from time to time. Two years is a long lag and thus, option ‘c’ is incorrect.

Option (d):

Long lags suggest a policy that is passive rather than active and such long gaps have an opposite effect on the economy (destabilization) as the economic conditions change from time to time. Five years is a really long lag and thus,option‘d’ is incorrect.

Economics Concept Introduction

Concept introduction:

Monetary policy: It refers to the credit control system adopted by the central bank of a country with an aim to achieve its macroeconomic policy objectives.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 36, Problem 1CQQ

To determine

Time taken for the monetary policy to influence aggregate demand.

Expert Solution & Answer

Answer to Problem 1CQQ

Option ‘b’ is correct.

Explanation of Solution

Option (b):

Many studies suggest that it takes at least 6 months for the monetary policy to have an effect on aggregate demand. Monetary policy affects aggregate demand primarily by changing interest rates. However, mostly households and firms set their spending plans in advance; as a result, there is a time lag for changes in interest rate to alter the aggregate demand for goods and services Thus, option ‘b’ is correct.

Option (a):

Monetary policy works with a lag and hence, one month is insufficient for the monetary policy to reflect changes in the economy. Thus, option ‘a’ is incorrect.

Option (c):

Long lags suggest a policy that is passive rather than active, and such long gaps have an opposite effect on the economy (destabilization) as the economic conditions change from time to time. Two years is a long lag and thus, option ‘c’ is incorrect.

Option (d):

Long lags suggest a policy that is passive rather than active and such long gaps have an opposite effect on the economy (destabilization) as the economic conditions change from time to time. Five years is a really long lag and thus,option‘d’ is incorrect.

Economics Concept Introduction

Concept introduction:

Monetary policy: It refers to the credit control system adopted by the central bank of a country with an aim to achieve its macroeconomic policy objectives.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 36, Problem 1CQQ

To determine

Time taken for the monetary policy to influence aggregate demand.

Expert Solution & Answer

Answer to Problem 1CQQ

Option ‘b’ is correct.

Explanation of Solution

Option (b):

Many studies suggest that it takes at least 6 months for the monetary policy to have an effect on aggregate demand. Monetary policy affects aggregate demand primarily by changing interest rates. However, mostly households and firms set their spending plans in advance; as a result, there is a time lag for changes in interest rate to alter the aggregate demand for goods and services Thus, option ‘b’ is correct.

Option (a):

Monetary policy works with a lag and hence, one month is insufficient for the monetary policy to reflect changes in the economy. Thus, option ‘a’ is incorrect.

Option (c):

Long lags suggest a policy that is passive rather than active, and such long gaps have an opposite effect on the economy (destabilization) as the economic conditions change from time to time. Two years is a long lag and thus, option ‘c’ is incorrect.

Option (d):

Long lags suggest a policy that is passive rather than active and such long gaps have an opposite effect on the economy (destabilization) as the economic conditions change from time to time. Five years is a really long lag and thus,option‘d’ is incorrect.

Economics Concept Introduction

Concept introduction:

Monetary policy: It refers to the credit control system adopted by the central bank of a country with an aim to achieve its macroeconomic policy objectives.

Answer 6

Chapter 36, Problem 1CQQ

To determine

Time taken for the monetary policy to influence aggregate demand.

Expert Solution & Answer

Answer to Problem 1CQQ

Option ‘b’ is correct.

Explanation of Solution

Option (b):

Many studies suggest that it takes at least 6 months for the monetary policy to have an effect on aggregate demand. Monetary policy affects aggregate demand primarily by changing interest rates. However, mostly households and firms set their spending plans in advance; as a result, there is a time lag for changes in interest rate to alter the aggregate demand for goods and services Thus, option ‘b’ is correct.

Option (a):

Monetary policy works with a lag and hence, one month is insufficient for the monetary policy to reflect changes in the economy. Thus, option ‘a’ is incorrect.

Option (c):

Long lags suggest a policy that is passive rather than active, and such long gaps have an opposite effect on the economy (destabilization) as the economic conditions change from time to time. Two years is a long lag and thus, option ‘c’ is incorrect.

Option (d):

Long lags suggest a policy that is passive rather than active and such long gaps have an opposite effect on the economy (destabilization) as the economic conditions change from time to time. Five years is a really long lag and thus,option‘d’ is incorrect.

Economics Concept Introduction

Concept introduction:

Monetary policy: It refers to the credit control system adopted by the central bank of a country with an aim to achieve its macroeconomic policy objectives.

Answer 7

Chapter 36, Problem 1CQQ

To determine

Time taken for the monetary policy to influence aggregate demand.

Answer 8

Expert Solution & Answer

Answer to Problem 1CQQ

Option ‘b’ is correct.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Option (b):

Many studies suggest that it takes at least 6 months for the monetary policy to have an effect on aggregate demand. Monetary policy affects aggregate demand primarily by changing interest rates. However, mostly households and firms set their spending plans in advance; as a result, there is a time lag for changes in interest rate to alter the aggregate demand for goods and services Thus, option ‘b’ is correct.

Option (a):

Monetary policy works with a lag and hence, one month is insufficient for the monetary policy to reflect changes in the economy. Thus, option ‘a’ is incorrect.

Option (c):

Long lags suggest a policy that is passive rather than active, and such long gaps have an opposite effect on the economy (destabilization) as the economic conditions change from time to time. Two years is a long lag and thus, option ‘c’ is incorrect.

Option (d):

Long lags suggest a policy that is passive rather than active and such long gaps have an opposite effect on the economy (destabilization) as the economic conditions change from time to time. Five years is a really long lag and thus,option‘d’ is incorrect.

Answer 12

Economics Concept Introduction

Concept introduction:

Monetary policy: It refers to the credit control system adopted by the central bank of a country with an aim to achieve its macroeconomic policy objectives.

Answer 13

Ch. 36.1 - Prob. 1QQ Ch. 36.2 - Prob. 2QQ Ch. 36.3 - Prob. 3QQ Ch. 36.4 - Prob. 4QQ Ch. 36.5 - Prob. 5QQ Ch. 36.6 - Prob. 6QQ Ch. 36 - Prob. 1CQQ Ch. 36 - Prob. 2CQQ Ch. 36 - Prob. 3CQQ Ch. 36 - Prob. 4CQQ

Time taken for the monetary policy to influence aggregate demand .

Solution Summary: The author explains that monetary policy affects aggregate demand primarily by changing interest rates. However, most households and firms set their spending plans in advance.

Time taken for the monetary policy to influence aggregate demand.

Answer to Problem 1CQQ

Explanation of Solution

Want to see more full solutions like this?

Chapter 36 Solutions