Suppose that for each one-percentage-point increase in the interest rate, the level of investment spending declines by $0.5 billion. The change in the interest rate (according to the change you made to the money market in the previous scenario) therefore causes the level of investment spending to by After the multiplier effect is accounted for, the change in investment spending will cause the quantity of output demanded to by at each price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is effect. known as the Use the purple line (diamond symbol) on the graph at the beginning of this problem to show the aggregate demand curve (AD3) after accounting for the impact of the increase in government purchases on the interest rate and the level of investment spending. Hint: Be sure your final aggregate demand curve (AD3) is parallel to AD and AD2. You can see the slopes of AD₁ and AD2 by selecting them on

Mary is paid on the 1st of every month and her rent is due on the 15th of every month. This is an example of the Group of answer choices money management problem. nonsynchronization of income and spending. cash flow problem. financial float.

Banks are naturally unstable because they have ______________ liabilities, but __________________ assets. Group of answer choices a. long term; short term b. high; low c. short term; long term d. low; high

If life expectancy rises because people begin to eat food containing fewer preservatives and chemicals, we would expect Demand for funds to decrease Supply of funds to increase ON Demand for funds to increase Supply of funds to decrease

Federal funds are Loans by the Fed Deposits in the Fed Loans between banks Both (a) and (b) Both (b) and (c)

Question 14?

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The central bank buys $10,000 worth of bonds in the open market from Elaine, who deposits the proceeds in her checking account at MSM Bank. The required reserve ratio is 5%. (a) What is the amount by which MSM Bank’s liabilities have changed? Explain. (b) Calculate the change in required reserves for MSM Bank. Show your work. (c) What is the dollar value of the maximum amount of new loans MSM Bank can initially make as a result of Elaine’s deposit? Explain. (d) Based on the central bank’s open-market purchase of bonds, calculate the maximum amount by which the money supply can change throughout the banking system. Show your work. (e) How will the change in the money supply in part (d) affect aggregate demand and the price level in the short run? Explain.

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