Question
In: Economics
Assume an economy with no international sector. (a) Explain how a decrease in the money supply...
Assume an economy with no international sector.
(a) Explain how a decrease in the money supply will affect interest rates.
(b) Explain how the change in the interest rate you identified in part (a) will directly affect each of the three components of aggregate demand for this closed economy.
(c) Explain how the change in the interest rate you identified in part (a) will affect each of the following in the short run.
(i) Output
(ii) Price Level
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Assume an economy with no international sector. (a) Explain how a decrease in the money supply...
Assume an economy with no international sector.
(a) Explain how a decrease in the money supply will affect
interest rates.
(b) Explain how the change in the interest rate you identified
in part (a) will directly affect each of the three components of
aggregate demand for this closed economy.
(c) Explain how the change in the interest rate you identified
in part (a) will affect each of the following in the short run.
(i) Output
(ii) Price Level
Describe how a decrease in money supply on the monetary side of the economy is transmitted...
Describe how a decrease in money supply on the monetary side of
the economy is transmitted to the real side. In particular,
emphasize what happens on the (i) money market, (ii) credit market,
and (iii) goods & services market. Will GDP eventually be
higher or lower? (6
sentences max.)
Describe how a decrease in the money supply on the economy causes the AD curve to...
Describe how a decrease in the money supply on the economy
causes the AD curve to shift. What is the effect on the price level
and output in the short run? In the long run?
Explain how a decrease in the money supply affects the money market and the position of...
Explain how a decrease in the money supply affects the money market
and the position of the aggregate-demand curve. What is the effect
for a closed economy and for a small open economy?
use money supply and money demand model to show how a decrease in money supply shifts...
use money supply and money demand model to show how a decrease
in money supply shifts lm curve
1. Explain how a decrease in the discount rate affects credit availability and the money supply....
1. Explain how a decrease in the discount rate affects credit
availability and the money supply.
2.Which of the monetary tools available to the Federal Reserve
is most often used? Why?
Explain how the central bank can decrease the supply of money by using (1) open market...
Explain how the central bank can decrease the supply of money by
using (1) open market transactions, (2) reserve requirements and
(3) discount rates. Briefly discuss.
Assume the Fed decided to decrease money supply. Using the IS/LM model along with the aggregate...
Assume the Fed decided to decrease money supply. Using the IS/LM
model along with the aggregate demand, aggregate supply, verbally
explain what will happen to the Price level, Output, Consumption,
Unemployment and interest rate in both the short run and long
run.
Verbally state the movements and shifts in the curves. Make sure
to explain how the economy transitions form the short run to the
long run.
Explain how the reserve bank influences the money supply in the economy (15%). Next, discuss the...
Explain how the reserve bank influences the money supply in the
economy (15%). Next, discuss the objectives of the reserve bank in
conducting monetary policy (10%).
Assume that an economy experiences an adverse supply shock that causes stagflation (simultaneous decrease in output...
Assume that an economy experiences an adverse supply shock that
causes stagflation (simultaneous decrease in output (increase in
unemployment) and increase in prices). In your opinion, should the
government use expansionary or contractionary fiscal policy to
address the situation? Explain your answer, mentioning the
tradeoffs that each of the policies involves?
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