explain the following: * Money supply curve is vertical. * policy is not efficient in the...

explain the following:

* Money supply curve is vertical.

* policy is not efficient in the Long run

Expert Solution

1. Supply Curve for money :- The Supply Curve for money exemplify the quantity of money supplied at a given interest rate. The money supply is a fixed amount, it will change when either the monetary base changes or banks make loans.

The money supply is decided by the monetary base and the money multiplier.

Money Supply is vertical because it does not depend on interest rates. It is completely dependent on the decisions made by the Central Bank of the Company.

Diagram

2. Policy is not efficient in the long run:-

The long run is a period of time in which all factors of production and costs are changeable. In the long run, all firms are able to modify all costs.

In long run, the number of firms can enter and exit the marketplace. And firms can earn positive, negative or zero profit. The land, labor, capital goods and entrepreneurship will reach the minimum level of long run average cost.

So, policy which can be efficient in short run will not be compulsarily be efficient in the long run.

Rahul Sunny answered 7 months ago

The liquidity trap refers to the assumption that the money supply curve is vertical as a...

The liquidity trap refers to the assumption that the money supply curve is vertical as a result of the Fed's control. problem that occurs when interest rates reach such high levels that no individuals want to hold their wealth in the form of money. situation that occurs when an excess supply of money results in people holding more money than they desire. possibility that interest rates drop so low that people willingly hold all the additions to the money supply,...

Question 1 What does a vertical supply curve of money indicate? a. It indicates that the...

Question 1 What does a vertical supply curve of money indicate? a. It indicates that the larger the supply of money, the higher the interest rate, all things equal. b. It indicates that the quantity of money supplied depends on the interest rate. c. It indicates that the lower the interest rate, the higher the opportunity cost of holding assets in the form of money. d. It indicates that the quantity of money supplied is independent of the interest rate....

Explain why the long run aggregate supply curve (LRAS) is vertical. Given that the LRAS curve...

Explain why the long run aggregate supply curve (LRAS) is vertical. Given that the LRAS curve constrains the long run growth potential of the economy, discuss what can be done to make it grow more quickly. Are there any examples of current policies (or proposed policies) trying to do just that?

Suppose the demand curve for a product is vertical and the supply curve is upward sloping....

Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a unit tax is imposed in the market for this product, A. buyers bear the entire burden of the tax. B. buyers share the burden of the tax with government. C. the tax burden will be shared equally between buyers and sellers. D. sellers bear the entire burden of the tax. Explain how a downward-sloping demand curve results from consumers adjusting their consumption...

Assume that a supply of raw land is fixed (vertical supply curve) and that the elasticity...

Assume that a supply of raw land is fixed (vertical supply curve) and that the elasticity of demand for raw land is higher than zero. In such a situation, A tax on raw land causes In the market for roses, the demand curve is the typical downward-sloping straight line and the supply is the typical upward-sloping straight line. When there is no tax, the equilibrium quantity is 250 roses per week. A tax of $5 allows the government to raise...

Q11.7: Explain why the short-run aggregate supply curve might be vertical in the neoclassical zone of...

Q11.7: Explain why the short-run aggregate supply curve might be vertical in the neoclassical zone of the SRA. How might we tell if we are in the neoclassical zone of the AS? Q12.1 In a Keynesian framework, using an AD/AS diagram, which of the following government policy choices offer a possible solution to recession? Which offer a possible solution to inflation? a. A tax increase on consumer income. b. A surge in military spending. c. A reduction in taxes for...

4. Explain why the aggregate supply curve is positively sloped during the short run and vertical...

4. Explain why the aggregate supply curve is positively sloped during the short run and vertical in the long run. 5. List some examples of factors that will shift the aggregate demand curve. 6. List some examples of factors that will shift the long-run aggregate supply curve.

1. Explain why the long-run aggregate supply (LRAS) curve is vertical while the short-run aggregate supply...

1. Explain why the long-run aggregate supply (LRAS) curve is vertical while the short-run aggregate supply (SRAS) curve slope upwards. List and discuss briefly the variables that could cause the LRAS and the SRAS curves to shift. For each variable, identify whether an increase in that variable will cause the curves (LRAS and SRAS curves) to shift to the right or to the left. 2. What are the main roles of the Reserve Bank of Australia (RBA)? How does the...

using a graph of money supply and demand, explain why a policy of setting a constant...

using a graph of money supply and demand, explain why a policy of setting a constant interest rate could be destabilizing

Graph a labor supply curve with an upward-sloping labor supply. Label the vertical axis as “wage...

Graph a labor supply curve with an upward-sloping labor supply. Label the vertical axis as “wage rate” and the horizontal axis with “Quantity of labor” a. Place these two points on the curve: {wage= $10, quantity = 30} and {wage = $12, quantity = 45}. Calculate the labor supply elasticity.Label this curve as “Curve A” b. Now, assume that something has changed the labor supply curve so that now the line has a different slope. On this new curve are...

Question