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a. Explain why the aggregate short-run
b. What is the theory of liquidity preference?
c. How does it help to explain the downward slope of the aggregate demand cure?
d. Suppose that changes in the bank regulations expand the availability of credit cards so that people need to hold less cash.
(i) How does that affect the demand for money?
(ii) If the Central Bank does not respond to this event, what will happen to the price level?
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- What is the expected impact of a decline in the money supply to the US economy? A. Higher aggregate prices (inflation) B. Lower aggregate prices (deflation) C. There is no general relationship between the money supply and inflatonWhich of the following describes the chain of events the Central bank uses to fight recession? A. Raise the monetary policy rate target, sell government securities, decrease reserves and loans, increase aggregate demand.B. Raise the monetary policy rate target, buy government securities, increase reserves and loans, decrease aggregate demand.C. Lower the monetary policy rate target, buy government securities, decrease reserves and loans, decrease aggregate demand.D. Lower the monetary policy rate target, buy government securities, increase reserves and loans, increase aggregate demand.a) Explain what happens to Money Demand when each of the following occurs: i, incomes rise; ii. the interest rate rises. b. Use the money market to explain why the aggregate demand curve slopes downward.
- What is the effect of a rise in the U.S. price level on the buying power of money? The buying power of money _______. A. increases and aggregate demand increases B. increases and the quantity of real GDP demanded increases C. decreases and the quantity of real GDP demanded decreases D. decreases and aggregate demand decreasesMoney supply versus interest rate targets. assume that the economy's real GDP is growing. a. What will happen to money demand over time? b. If the Fed leaves the money supply unchanged, what will happen to the interest rate over time? c. If the Fed changes the money supply to match the change in money demand, what will happen to the interest rate over time? d. What would be the effect of the policy described in part (c) on the economy's stability over the business cycle?This question is about the money market and the workings of central bank. a. How a central bank uses the open market operations (OMO) to increase or decrease money supply? b. What kind of relationship exist between an asset’s price and rate of return? Explain why. c. Please write a “real money demand function” and show and explain what are the main determinants of money demand with the signs (- or +) of each factor. d. Is the money demand function that you wrote in part (c) same with “the Cambridge money demand function”? Explain if there is a difference between the two. e. What the quantity theory of money (QTM) says about the relationship between money supply and the price level? Explain
- In an economy where the central bank implements negative interest rates as a monetary policy tool, what is the most likely short-term impact on consumer savings behavior and bank profitability? A. An increase in consumer savings as people seek to safeguard their money and a rise in bank profitability due to increased lending. B. A decrease in consumer savings as the incentive to save diminishes and a decrease in bank profitability due to lower interest margins. C. No significant change in consumer savings behavior but an improvement in bank profitability due to lower borrowing costs. D. A shift in consumer investment towards riskier assets and challenges in bank profitability due to compressed interest margins. Please don't use chatgpt it is giving wrong answer and please provide valuable answerAssume an economy is experiencing a recession What are the three major tools a central bank can use to address the recession? b. What would the central bank do with each tool to increase the money supply? Explain for each. a.5) Suppose a computer virus disables the nation’s automatic teller machines , making withdrawals from bank accounts less convenient .As a result, people want to keep more cash on hand ,increasing the demand for money. a) Assume the Fed does not change the money supply . According to the theory of liquidity preference,what happens to the interest rate? What happens to aggregate demand. b) If instead the Fed wants to stabilize aggregate demand, how should it change the money supply? C) If its want to accomplish this change in the money supply using open-market operations,what should it do?
- d. The Federal Reserve decides to take action to reduce the inflation rate in the US. i. What open market operation should the Fed undertake? ii. Use a correctly labeled graph of the money market to show the impact of the open market operation. iii. Explain how the change in the interest rate you identified on your graph in part (d) (ii) would affect price level and real output in the US. iv. Explain the impact of the change in price level you identified in part (d) (iii) on real wages in the short run. v. Explain the impact of the change in price level you identified in part (d) (iii) on people who had previously loaned money at a fixed interest rate. e. If the open market operation you identified in part (d) (i) was equal to $6 million, what would be the maximum total change in the money supply if the required reserve ratio is 10 percent? Explain how you determined this amount.The Central Bank of Colombia required banks to decrease their cash reserve ratio. What will be its effect? a.Decrease in the aggregate supply b.Increase in money supply available for loans c.Increase in the aggregate supply d.Decrease in money supply available for loans24. If the economy is at potential output, and the Fed increases the money supply, in the short run, the likely result will be a(n) _____ in investment and a(n) _____ in consumer spending. increase; decrease decrease; increase increase; increase decrease; decrease 26. Suppose that a typical basket of goods is now less expensive than it used to be. All else equal, we would expect: the demand curve for money to shift outward. a downward movement along a fixed money demand curve. the demand curve for money to shift inward. an upward movement along a fixed money demand curve.
