Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 14.1, Problem 3ST
(a)
To determine
The change in aggregate
(b)
To determine
The change in aggregate demand curve.
(c)
To determine
The change in aggregate demand curve.
(d)
To determine
The change in aggregate demand curve.
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Suppose velocity rises and the money supply falls.
How will things change in the AD–AS framework if a change in the money supply is completely offset by a change in velocity? Check all that apply.
The increase in velocity could shift the AD curve to the left by the same amount as the fall in the money supply shifts the AD curve to the right.
Changes in the money supply would have no effect on Real GDP, the short-run price level, nor the long-run price level.
A change in the money supply would decrease Real GDP, the short-run price level, and the long-run price level.
The increase in velocity could shift the AD curve to the right by the same amount as the fall in the money supply shifts the AD curve to the left.
The United States is at full employment when the Fed cuts the quantity of money, other things remaining the same. Which explains correctly the sequence of effects and the effect of the cut in money supply on aggregate demand?
1. We start with the money market equilibrium. The money supply curve shifts to the right and the rate of interest rises. This will decrease real investment that we can see from the Investment demand function. The AE curve will move down as investment (Ibar) declines. This will shift the AD to the left.
2. We start with the money market equilibrium. The money supply curve shifts to the left and the rate of interest rises. This will increase real investment that we can see from the Investment demand function. The AE curve will move down as investment (Ibar) declines. This will shift the AD to the left.
3. We start with the money market equilibrium. The money supply curve shifts to the left and the rate of interest rises. This will decrease real…
20) Use a graph to show the differences in the central bank reaction function if the Fed is more tolerant or less tolerant of deviations from inflation in the short run.
21) For each of the following scenarios, state the short-run effect on the AD curve.
a. The price level decreases.
b. The target inflation rate increases.
c. The U.S. dollar falls in value relative to other currencies.
d. Government spending increases.
e. The Fed becomes more tolerant of deviations from the target inflation rate.
22) Explain why some shifts to the aggregate demand curve are temporary and why some are permanent.
Chapter 14 Solutions
Macroeconomics
Ch. 14.1 - Prob. 1STCh. 14.1 - Prob. 2STCh. 14.1 - Prob. 3STCh. 14.2 - Prob. 1STCh. 14.2 - Prob. 2STCh. 14.3 - Prob. 1STCh. 14.3 - Prob. 2STCh. 14.3 - Prob. 3STCh. 14.4 - Prob. 1STCh. 14.4 - Prob. 2ST
Ch. 14.4 - Prob. 3STCh. 14 - Prob. 1QPCh. 14 - Prob. 2QPCh. 14 - Prob. 3QPCh. 14 - Prob. 4QPCh. 14 - Prob. 5QPCh. 14 - Prob. 6QPCh. 14 - Prob. 7QPCh. 14 - Prob. 8QPCh. 14 - Prob. 9QPCh. 14 - Prob. 10QPCh. 14 - Prob. 11QPCh. 14 - Prob. 12QPCh. 14 - Prob. 13QPCh. 14 - Prob. 14QPCh. 14 - Prob. 15QPCh. 14 - Prob. 16QPCh. 14 - Prob. 17QPCh. 14 - Prob. 18QPCh. 14 - Prob. 19QPCh. 14 - Prob. 1WNGCh. 14 - Prob. 2WNGCh. 14 - Prob. 3WNGCh. 14 - Prob. 4WNGCh. 14 - Prob. 5WNGCh. 14 - Prob. 6WNGCh. 14 - Prob. 7WNGCh. 14 - Prob. 8WNG
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