Suppose the central bank targets the money supply. As a result, the interest rate will ______...

Suppose the central bank targets the money supply. As a result, the interest rate will ______ and output will ______ following an increase in government spending

A fall;rise

B rise;fall

C rise;rise

D fall; fall

Expert Solution

Rahul Sunny answered 7 months ago

If the central bank increases the money supply, then the nominal interest rate will ____ and...

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

Suppose the European Central Bank decreases the growth rate of their money supply and the Federal...

Suppose the European Central Bank decreases the growth rate of their money supply and the Federal Reserve simultaneously decreases the growth rate of money supply as well. Working through the analytics involved explain the impact these policy interventions will have on the dollar-euro exchange rate.

How does a situation in which the central bank targets the domestic interest rate differ from...

How does a situation in which the central bank targets the domestic interest rate differ from one in which capital mobility is perfect, so that the domestic interest rate is pinned down by uncovered interest parity?

When home central bank permanently changed nominal money supply, home interest rate fell in the long-run....

When home central bank permanently changed nominal money supply, home interest rate fell in the long-run. Consider the shifts of curves in the long run. How would the AA curve and DD curve shift? When Government used an expansionary fiscal policy, how current account would change? In order to manage huge structural changes, which system, the floating exchange rate system or the fixed exchange rate system, is much better?

16. Suppose the central bank increases the money supply in order to increase the equilibrium level...

16. Suppose the central bank increases the money supply in order to increase the equilibrium level of GDP. Which of the following conditions would lead to a large increase in GDP given the increase in the money supply? A. A small marginal propensity to consume B. A very steep investment schedule C. A very steep money demand schedule D. All of the above conditions

If a central bank increases the money supply in response to an adverse supply shock, then...

If a central bank increases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result? a. neither output nor the price level b. both the price level and output c. the price level but not output d. output but not the price level

Suppose that you deposit your money in a bank that pays interest at a rate of...

Suppose that you deposit your money in a bank that pays interest at a rate of 18% per year. How long will it take for your money to triple if the interest is compounded weekly? (1year= 52 weeks) compounded continuously? compounded quarterly?

In a modern money economy, the money supply is composed of central bank issued currency and...

In a modern money economy, the money supply is composed of central bank issued currency and certain privately issued bank deposits that are convertible into currency on demand and can be transferred as payments electronically or by check. Thus, the stock of money is composed of both central bank notes (currency) and private bank debts (transaction or checkable deposits). There exists another class of government issued debts that are promises to pay fixed amounts of money at a specified time(s)...

Suppose the central bank increases discount rate. Use a graph of the money market to show...

Suppose the central bank increases discount rate. Use a graph of the money market to show what this does to the value of money?

Suppose the central bank is following a constant-money-growth-rate rule and the economy is hit with a...

Suppose the central bank is following a constant-money-growth-rate rule and the economy is hit with a severe economic downturn. Use an aggregate supply and demand graph to show the possible effects on the economy. How does this situation reflect on the credibility of the central bank if it maintains the money growth rule? How does it reflect on the central bank’s credibility if it abandons the money growth rule to respond to the downturn?

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