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?

Expert Solution

Rahul Sunny answered 2 years 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 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

Suppose the economy is initially at a long-run equilibrium. Then the central bank increases the money...

Suppose the economy is initially at a long-run equilibrium. Then the central bank increases the money supply. Assuming any resulting inﬂation is unexpected, explain any changes in GDP, unemployment, and inﬂation in the short-run that are caused by the monetary expansion. Explain your conclusions using three diagrams: (i) one for the IS-LM model, (ii) one for the AD-AS model, and (iii) one for the Phillips curve.

Why does increasing the money supply affect only nominal variables in the long run?

1-In the short run, when the central bank increases the quantity of money, the A)demand for...

1-In the short run, when the central bank increases the quantity of money, the A)demand for money decreases. B)price level decreases. C)demand for money increases. D)nominal interest rate falls. E)quantity demanded of money decreases 2-If the quantity of money supplied ________ the quantity demanded, in the long run the value of money ________. a)exceeds; falls as people spend their surplus money b)exceeds; rises as people buy bonds c)is less than; falls as people spend their surplus money d)is less than;...

If the fed reduced the growth rate of the money supply to the long run growth...

If the fed reduced the growth rate of the money supply to the long run growth rate of output immediately and people believed that it would persist, what would the immediate impact be? Explain whether each variable rises, falls or not change and why. A. Expected inflation B. The nominal interest rate C. The real interest rate

The long-run response to an increase in the growth rate of the money supply is shown...

The long-run response to an increase in the growth rate of the money supply is shown by shifting a. the short-run and long-run Phillips curves left. b. the short-run and long-run Phillips curves right. c. only the short-run Phillips curve left. d. only the short-run Phillips curve right.

Which of the following is TRUE when the central bank buys bonds? Money supply decreases Money...

Which of the following is TRUE when the central bank buys bonds? Money supply decreases Money supply increases Interest rates increase Money multiplier increases

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.

What are the short-run and long-run effects of monetary tightening on nominal interest rate? 12. Ture...

What are the short-run and long-run effects of monetary tightening on nominal interest rate? 12. Ture of False (based on Question 11 above): In the short run, normal interest rate does not rise as much as the real interest rate. (Please justify)

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