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A: Answer to the question is as follows :
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A: Inflation refers to increase in overall price level in an economy.
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A: The following problem in relation to money demand and supply is answered as follows:
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A:
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Q: image attached
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A: note:- I guess it is a barter system instead of a bottle system, so the answer below is based on how…
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A: Reserve requirements are the funds that a bank must hold in its reserve to able to meet liabilities…
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A: Discount rate, conjointly called rediscount rate or bank rate, is the rate of interest charged by a…
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- Which point/s represent an equilibrium in the goods market? a. A only O b. A and D O c. A and C O d. All of the above Which point/s represent an equilibrium in the money market? O a. A and D O b. All of the above O c. A only O d. A and C A decrease in autonomous spending will decrease the equilibrium interest rate. O a. False; keep O b. False; increase O c. False; not affect because autonomous spending is not related to interest rate O d. TrueSuppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy’s multiplier is 4. a. If household wealth falls by 5 percent because of declining house values, and the real interest rate falls by 3 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level?Assume, in the 3rd quarter of 2018 in the U.S., the velocity of money was 3.08 and the M2 money supply was $1,050 million. The average prices in the economy was $1.44. Based on this, what was the real GDP of the U.S. in the 3rd quarter of 2018. O a. $2,750 million O b.$1,250 millon Oc. $2,000 million O d. 52.250 million
- Increases in the money supply affect the economy indirectly because O A. interest rates increase causing planned investment to decrease, which causes a decrease in aggregate demand. O B. people have insufficient money balances and thus, aggregate demand decreases. O C. interest rates decrease, causing planned investment to increase, which causes an increase in aggregate demand. O D. people spend excess money balances and thus aggregate demand increases. O E. There is no indirect effect of the money supply on the economy.In the market for real output, the initial effect of an increase in the money supply is to O a. shift aggregate demand to the right O b. shift aggregate supply to the left O c. shift aggregate supply to the right O d. shift aggregate demand to the leftNow consider an economy in which the government lowers its spending. In the long run, the result would be in real output. in the price level and O no change, a decrease O an increase, an increase O a decrease; a decrease O None of the listed options is correct. O a decrease, no change
- The observed correlation between the price level and real GDP may be low because O consumption is procyclical. O the central bank acts to target the price level. O money demand increases when the nominal interest rate rises. O money demand does not depend on income.2. Suppose that the money market can be depicted in the graph below. Interest rate (M/P)² (M³/P)⁰ (M³/P)1 H A K O B C O E L3 L1 L2 Quantity of Money LI is the original demand for money by the public and (M/P) is the real money supply. Assume tha the price level does not change. The original equilibrium is at point O. Suppose that the government lowered income taxes so that consumers had more disposable income. Briefly describe how you reached that conclusion. Identify the new equilibrium point and what happens to interest ratesThe diagrams show the monetary equilibrium and the demand for investment. The economy begins with money supply Ms, money demand Mp, and investment demand ID. The interest rate is in and desired investment is lo. Interest Rate % O A. interest rates will fall and the quantity of desired investment expenditure will fall. O B. interest rates will rise and the quantity of desired investr expenditure will fall. C. interest rates will rise and the quantity of desired investment expenditure will rise. O D. interest rates will fall and the quantity of desired investment expenditure will rise. 00 .O Ms a. Beginning at the initial equilibrium, suppose the Bank of Canada increases the money supply. In this case, Quantity of Money Mp Interest Rate % Desired Investment Q
- a) Which of the follwing monetary policy actions can be used to close an inflationary gap?O No change in the money supply to keep interest rates constant.ODecrease the money supply to decrease interest rates,OIncrease the money supply to increase interest rates.O Increase the money supply to decrease interest rates.O Decrease the money supply to increase interest rates. b) Assume the economy is initially at full-employment equilibrium. Suppose the economy slows down and uncertainty increases, reducing consumption and investment expenditures, in the short run, this shock willcause the economy to fall below full enployment. To move the economy to a full-employment equilibrium, the Fed could:O. decrease government spendingO. increase corporate tax ratesO. lower the federal fund rate targetO. increase government spending O. raise interest ratesSuppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy's multiplier is 4. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? In what direction and by how much will it eventually shift?Which of the following represents a point along the LM curve? O a. When money demanded is equal to the quantity of goods demanded O b. Money market equilibrium O c. When money demand is equal to the quantity of goods supplied O d. Goods market equilibrium Government spending does not affect the investment schedule. O a. True O b. False; shifts investment schedule to the right O c. False; makes investment schedule steeper or flatter O d. False; shifts investment schedule to the left