[MUST SHOW WORK] Suppose the Bank of Canada uses open market operations to raise the overnight rate. As a result the _____________. (Draw a graph to show your work.) Select one: A. demand for money decreases B. quantity of money supplied increases
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#16
[MUST SHOW WORK]
Suppose the Bank of Canada uses open market operations to raise the overnight rate. As a result the _____________.
(Draw a graph to show your work.)
Select one:
A.
B.
quantity of money supplied increases
C.
demand for money increases
D.
supply of money decreases
E.
supply of money increases
Step by step
Solved in 3 steps with 1 images
- Economics If the Fed increases the money supply by 0.5%, will the value of money increase or decrease? Will the price level increase or decrease? Illustrate with a graph. (b) Now suppose the demand for money decreases. Does this result in inflation or deflation? Explain.Question 13 (1 point) Suppose the supply of money, measured by M1, is $3.0 trillion, output, measured by real GDP, is $18.7 trillion, and the velocity of money is 7.1. Suppose the supply of money increases to $3.7 trillion but GDP and the velocity of money do not change. What is the percent by which prices change? Provide your answer as a percentage rounded to two decimal places. Do not include any symbols, such as "$," "," "%," or "," in your answer. Your Answer: Answer3. Changes in the money supply The following graph represents the money market in a hypothetical economy. As in the United States, this economy has a central bank called the Fed, but unlike in the United States, the economy is closed (that is, the economy does not interact with other economies in the world). The money market is currently in equilibrium at an interest rate of 4% and a quantity of money equal to $0.4 trillion, as indicated by the grey star. (? 6.0 A New MS Curve Money Demand 5.0 4.5 New Equilibrium 4.0 3.6 3.0 2.5 Money Supply 2.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 MONEY (Trillions of dollars) Suppose the Fed announces that it is lowering its target interest rate by 75 basis points, or 0.75 percentage point. To do this, the Fed will use open- market operations to v the v money by v the public. Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing the new money supply curve (MS) in the correct location. Place the black…
- Why do the supply of money and the volume of bank loans both increase or decrease at the same time? Context: The supply of money and the volume of bark loans both increase or decrease at the same. Time because issuing new bank loans to the money supply, while calling in existing bank loans reduces the money supply.3. Changes in the money supply The following graph represents the money market in a hypothetical economy. As in the United States, this economy has a central bank called the Fed, but unlike in the United States, the economy is closed (that is, the economy does not interact with other economies in the world). The money market is currently in equilibrium at an interest rate of 3% and a quantity of money equal to $0.4 trillion, as indicated by the grey star. (?) INTEREST RATE (Percent) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0 Money Demand 0.1 Money Supply 0.3 0.4 0.5 MONEY (Trillions of dollars) 0.2 0.6 0.7 0.8 New MS Curve New Equilibrium Suppose the Fed announces that it is raising its target interest rate by 75 basis points, or 0.75 percentage point. To do this, the Fed will use open- market operations to the money by the public. Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing the new money supply curve (MS) in the correct…FIN Lee Dash Mid T Question Not yet answere (a) "Hyperinflation in Venezuela is the currency instability in Venezuela that began in 2016 during the country's ongoing socioeconomic and political crisis. Venezuela began experiencing continuous and uninterrupted inflation in 1983, with double-digit annual inflation rates. Inflation rates became the highest in the world in 2014 under Nicolás Maduro, and continued to increase in the following years, with inflation exceeding 1,000,000% by 2018. Economist had highlighted some potential causes of the hyperinflation include heavy money-printing and deficit spending by Venezuela government and offcourse, the loss of massive government revenue due to weak oil price which 90% of its export rely on oil industry." (Alijazeera, 2019) (i) potential causes of "Economist had highlighted some the hyperinflation include heavy money-printing and deficit spending by Venezuela government..." Using appropriate diagrams, explain how fiscal deficit cause…
- 43)Silver used as money was called _______ and ______ Select one: a. Commodity money; A discovery of silver would lead to deflation b. Fiat Money; A discovery of silver would lead to inflation c. Fiat Money; A discovery of silver would lead to deflation d. Commodity money; A discovery of silver would lead to inflation(Monetary Control) Suppose the money supply is currently $500 billion and the Fed wishes to increase it by $100 billion. A. Given a required reserve ratio of 0.25, what should it do? B. If it decided to change the money supply by changing the required reserve ratio, what change should it make? Why may the Fed be reluctant to change the reserve requirement?Exercise 2 Suppose that money demand is given by MD= $Y(0.25 – i) where $Y is $100. Also, suppose that the supply of money is $20. a. What is the equilibrium interest rate? b. If the Federal Reserve Bank in the USA wants to increase i by 10 percentage points, at what level should it set the supply of money?
- Question 1 Table 1: Economy X Demand for Money Quantity of Money Nominal Interest Rate (% per year) Holdings ($M) A 7 2.4 B 5 3.0 C 3 4.0 (i) What is the relationship between the two variables as shown in table 1 and why does this relationship exist? (ii) Assume the quantity of real money supplied (money supply) is $3M when interest rates are at 5%. Describe what is occurring when interest rates are at 7%?Question 3a) What are the functions of money?b) Draw diagrams illustrating the impact on the demand for money, the supply of money and the equilibrium interest rate, of each of the following. Explain what is going on in the money market in each case.(i) The central bank sells securities on the open market(ii) The economy grows (GDP increases) but the central bank moves tokeep interest rates constant.Question 3 i) ii) iii) iv) v) Use the quantity theory of money to explain why increasing money supply need not result in inflation in an economy The nominal Gross Domestic Product of a country in the year 2015 is $25 billion. If the money supply in the economy is $20 billion, estimate the number of times money changed hands in this economy in 2015. Carefully explain why the aggregate demand curve slopes downwards from left to right Explain why planned expenditure may differ from actual expenditure in national income analysis. Use the aggregate demand and supply curves to explain stagflation OC