What is an implication of the neutrality of money in the long run?. (a) The economy's level of potential output will adjust to accommodate any change in the money supply. (b) Changes to the money supply have no effect on either the price level or real GDP. (c) In response to any change in the money supply, the demand for money will adjust to cancel out its effects on all macroeconomic variables. (d) In response to any change in the money supply, the economy's adjustment process will bring Y back to Y*, which is unaffected by the change in the money supply. (e) Changes to the money supply never have any effect on real GDP.

What is an implication of the neutrality of money in the long run?. (a) The economy's level of potential output will adjust to accommodate any change in the money supply. (b) Changes to the money supply have no effect on either the price level or real GDP. (c) In response to any change in the money supply, the demand for money will adjust to cancel out its effects on all macroeconomic variables. (d) In response to any change in the money supply, the economy's adjustment process will bring Y back to Y*, which is unaffected by the change in the money supply. (e) Changes to the money supply never have any effect on real GDP.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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(1) Suppose the economy is in long-run equilibrium. If there is a sharp increase in the expected price level, what do we expect to happen? Select one: (A) In the short run, the SRAS curve will shift left, real GDP and price will fall. (B) In the short run, SRAS will shift right, real GDP will rise and prices will fall. (C) In the short run, AD will shift left, real GDP and prices will fall. (D) In the short run, LRAS and SRAS will shift left, causing real GDP to fall.
Which event would shift short-run aggregate supply to the right? (a) A labor shortage puts upward pressure on wages, causing an increase in the expected rate of inflation. (b) An increase in government regulation makes it more costly for firms to comply with legislative requirements. (c) Expecting inflation to increase, workers bargain for higher wages. ( d) Internet technology allows retailers to use just-in-time delivery of merchandise, thereby lowering inventory costs. Only typed answer and don't use chat gpt
Suppose there is a permanent decrease in the country's money supply. (a) Describe the immediate effect on the foreign currency graph. (b) Describe the short-run effect on the rates of return graph. (c) Describe the long-run effect on the money graph. (d) Ássuming the net overall long-run effect is such that financial account is positive, primary budget is balanced, and investment is zero, then explain what happens to private saving and public debt.
Suppose the money demand function is = 1000 + 0.2Y - 1000 (r + πe). Required (a.) Calculate velocity if Y = 2000, r = 0.06, and πe = 0.04. (b.) If the money supply (Ms) is 2600, what is the price level? (c.) Now suppose the real interest rate rises to 0.11, but Y and Ms are unchanged. What happens to velocity and the price level? (d.) For part (c.), if the nominal interest rate were to rise from 0.10 to 0.15 over the course of a year, with Y remaining at 2000, what would the inflation rate be?
Price stability: Suppose you are the head of the central bank and your mandateis to maintain the price level at a constant value. Explain what you would doto the money supply in response to each of the following events:(a) Real GDP increases by 4% during a boom.(b) Real GDP declines by 1% during a recession.(c) Real GDP is growing at 3% per year.(d) Te velocity of money increases by 2%.(e) Te velocity of money declines by 1%.
(18) Assume that the economy begins in long-run equilibrium and that the federal reserve decides to use open market operations to sell bonds. What happens to the size of the money supply? Group of answer choices (A)It goes up. (B)It goes down. (C) It stays the same.
(b) List one assumption of the quantity theory of money. Based on the simple quantity theory of money, what would be the impact on the economy of increasing the money supply by 5%?
If a central bank buys government securities from the private sector-money markets,leading to an expansion of the money supply, other things being equal, what would theeffect be on the following?(a) The economy’s monetary base(b) Short-term money market interest rates(c) Investment(d) Aggregate Supply(e) Aggregate Demand(f) Economic activity(g) Price level of the economy
Use AD and AS curves to explain the effects on the equilibrium price level and equilibrium level of output in the short run.(a) An expansionary fiscal policy with the economy operating near full capacity. (b) A contractionary monetary policy during a period of high unemployment and excess industrial capacity. (c) A strong hurricane destroys energy plants which cause energy prices to increase, assuming that the Fed attempts to keep interest rates constant by accommodating inflation. (d) The federal government pursues a contractionary fiscal policy while the Fed acts to keep output from falling.
Suppose that the money demand function is (M/ P)^d = 1000-100r where r is the interest rate in percent. The money supply M is 1000 and the price level P is 2. (a) What is the equilibrium interest rate?(b) Assume the price level is xed. What happens to the equilibrium interest rate if the supply of money is raised from 1000 to 1200?
If money supply rises, will the price level rise by the same percentage? It all depends on what happens to V and Y. The effects will tend to differ in the short run from the long run. Delete the wrong words in the following statements: (a) In the short run, V can change substantially / is unlikely to change much at all when money supply changes. (b) In the short run, a rise in MV (i.e. a rise in aggregate demand) will lead to a rise in the price level / may or may not lead to a rise in the price level depending on the degree of slack in the economy.
2. The Administrative Lag in discretionary macroeconomic policy is (a) The lag between the time when the economy changed direction and the time when economists are able to conclude that the economy had actually changed and in which direction. (b) The time it takes for policymakers to devise policy responses to the macroeconomic problem. (c) The time it takes to implement the policies devised to address a macroeconomic problem. (d) The time it takes for the macroeconomic policies to materially change the economy.