In the real world, countries that have faster money growth over the long run tend to...

In the real world, countries that have faster money growth over the long run tend to have

a	lower government budget deficits over the long run
b	higher inflation over the long run
c	lower inflation over the long run
d	lower nominal interest rates over the long run

Solutions

Expert Solution

An increased money supply typically raises the aggregate demand through a fall in the rate of interest. An increased aggregate demand for goods and services relative to aggregate supply will increase the price level in shortrun. An increased price level raises the factor prices in longrun. Thus the net result of an increased money growth in an economy is higher inflation is longrun.

Answer: b. higher inflation over the longrun.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Describe the long-run relationship between money growth and inflation. How does the long-run growth of income...

Describe the long-run relationship between money growth and inflation. How does the long-run growth of income affect this relationship? Use the Fisher equation to describe the long-run relationship between money growth and nominal interest rates.

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

1.If low-income countries have GDP growth that is faster than that of middle-income countries, which in...

1.If low-income countries have GDP growth that is faster than that of middle-income countries, which in turn have GDP growth that is faster than that of high-income countries, this is a pattern of ______________. Select the correct answer below: economic expansion economic growth globalization economic convergence 2.We call the economy's movement from peak to trough and trough to peak the ____________. Select the correct answer below: business cycle business flow economic cycle economic circle 3.Comparing unemployment rates in the United...

What is the impact of money growth on economy (short run, adjustment period and long run)?

a) The owners of firms in the real world would generally expect (in the long run...

a) The owners of firms in the real world would generally expect (in the long run at least) to have some positive of profits on their accounting statements. However, in economic models we usually assume that firms will be willing to operate for zero economic profits even for the long term. Explain why this is the case. b) Explain why the profit maximising price and quantity for a price-setting firm (in a market where it can only set one price)...

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.

what will happen to price level and Real GDP in the long run if the money...

what will happen to price level and Real GDP in the long run if the money supply increases?

Assuming pure competition and long-run equilibrium are possible in the real world, what impact would this have on efficiency?

The long-run growth is measured as the increase in real GDP per capita and this measure...

The long-run growth is measured as the increase in real GDP per capita and this measure has changed over time and it also varies across countries. A country’s standard of living depends on its ability to produce goods and services (productivity). How do we measure long-term economic growth of a country? What are the key determinants of long-run economic growth? What is the relationship between economic growth and productivity? What is the major source of growth in labor productivity?

5. How does short-run and long run profit affect the real world? Give examples.

Subjects