MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Question
Chapter 12, Problem 5DQ
To determine
To describe: The reasons when the consumers tend to hold
more cash, especially in the season of christmas and the impact thereof.
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An increase in the money supply is likely to decrease:
1) Prices
2) Nominal income
3) Money demand
4) Interest rates
Suppose the Federal Reserve conducts an open market purchase from a bank for
$300 million. Assuming the required reserve ratio is 10%, what would be the effect on
the money supply in each of the following situations?
If there are many banks, all of which make loans for the full amount of their excess
reserves, the money supply will increase by $ million. (Enter your response as a
whole number.)
Based on Keynesian economic theory, which of the following will occur if the Central Bank increases the money supply?
Select one:
The price level will rise while the real rate of interest and the level of investment remains unchanged
The real rate of interest will fall and as such investment will increase
Aggregate demand will fall as prices rise
The nominal rate of interest will fall but the real rate of interest will also fall as the price level falls. As a result, investment remains unchanged
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