Assume COVID-19 causes people to keep more cash in checking
accounts rather than financial markets. How this would change
interest rate, investment, AD, GDP, Unemployment and price
level?
The interest rate effect suggests that
A. an increase in the price level increases the money supply,
which causes businesses and consumers to increase desired
spending.
B. a decrease in the price level decreases the interest rate,
which causes businesses and consumers to reduce desired
spending.
C. an increase in the price level increases the interest rate,
which causes businesses and consumers to reduce desired
spending.
D. an increase in the price level decreases the interest rate,...
an
interest rate:
A) is essentially the "price of money"
B)Responds to changes in supply and demand for financial
assets, including money
C) Is the amount you would be willing to pay or demand to
recieve in order to borrow or lend funds, respectively
D)All the above
E) A and B only
If the Federal Reserve decreases the rate at which it increases
the money supply, then unemployment is higher in __________.
Group of answer choices
the long run and the short run
the long run but not the short run
the short run but not the long run
neither the short run nor the long run
If the central bank increases the money supply, then the nominal
interest rate will ____ and the exchange rate will ____.
A
rise; appreciate
B
rise; depreciate
C
fall; appreciate
D
fall; depreciate
The interest rate is 5 percent initially. Now the Money Supply
increases and the interest rate declines to 3.5 percent in the
short run. Let us assume two scenarios. In the first
scenario, the interest rate ends up at 4 percent in the long run,
but in the second scenario it ends up at 6 percent in the long run.
State what we are assuming about the liquidity effect (LE), income
effect (IE), price level effect (PLE), and the expected...
Velocity.
a) The money supply is $600. The price level is 2 and Real GDP
is 900. What is velocity?
b) The money supply grows 3%, velocity is growing 1%, real
output is growing 2%. What is the inflation rate? Suppose that
people are worried that future inflation will be very high, so that
people don’t want to hold onto money since it will lose value,
which makes velocity grow at a rate of 10%. If the money supply
continues...
Velocity.
a) The money supply is $600. The price level is 2 and
Real GDP is 900. What is velocity?
b) The money supply grows 3%, velocity is growing 1%,
real output is growing 2%. What is the inflation rate? Suppose that
people are worried that future inflation will be very high, so that
people don’t want to hold onto money since it will lose value,
which makes velocity grow at a rate of 10%. If the money supply
continues...