Macroeconomics (Book Only)
12th Edition
ISBN: 9781285738314
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 14.2, Problem 1ST
(a)
To determine
The change in long run and short run.
(b)
To determine
The change in long run and short run.
(c)
To determine
The change in long run and short run.
(d)
To determine
The change in long run and short run.
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Students have asked these similar questions
What do monetarists predict will happen in the short run and in the long run as a result of each of the following? (In each case, assume the economy is currently in long-run equilibrium).(a) Velocity rises. (b) Velocity falls.(c) The money supply rises. (d) The money supply falls.
Which of the following is consistent with the monetarist view?
Select one:
A. A reduction in taxes will leave the value of real output unaffected
B. Interest rates may be affected by increases in G or reductions in T
C. Changes in M may cause changes in P in the long run.
D. Monetary policy should be used to correct a shortfall in real output
In monetarism, how will each of the following affect the price level in the short run?a) An increase in Velocityb) A decrease in velocityc) An increase in the Money supplyd) a decrease in the Money supply
Chapter 14 Solutions
Macroeconomics (Book Only)
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. 1VQPCh. 14 - Prob. 2VQPCh. 14 - Prob. 3VQPCh. 14 - Prob. 4VQPCh. 14 - Prob. 5VQPCh. 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. 1WNGCh. 14 - Prob. 2WNGCh. 14 - Prob. 3WNGCh. 14 - Prob. 4WNGCh. 14 - Prob. 5WNGCh. 14 - Prob. 6WNG
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- Suppose that the money supply and the nominal GDP for a hypothetical economy are $96 billion and $336 billion, respectively. What is the velocity of money? How will households and businesses react if the central bank reduces the money supply by $20 billion? By how much will nominal GDP have to fall to restore equilibrium, according to the monetarist perspective?arrow_forwardWhat would likely be the short-term impact on a country's inflation rate if the central bank significantly increases the money supply? A. The inflation rate would decrease. B. The inflation rate would remain unchanged. C. The inflation rate would increase. D. The inflation rate would initially increase, then sharply decrease.arrow_forwardEmpirical evidence that substantiates the Quantity theory includes which of the following? Select one or more: a. Countries with high rates of inflation over many years have high rates of growth of the money supply. b. In the US each year, the increase in the money supply is within a small margin of the increase in prices that year. c. Countries with high rates of inflation over many years have high rates of growth of real GDP. d. Countries with independent central banks tend to have high rates of inflation.arrow_forward
- If an economy is operating at full employment and there is a substantial increase in the money supply, which of the following is most likely to happen? A. Inflation increases B. Interest rates increase C. Real GDP increases D. Unemployment increasesarrow_forwardIn recent discussion, attention was devoted to the role of the central bank, the quantity theory of money, and the relationship between the money supply and inflation. Please answer the following two questions: A. One of my favorite economists, Milton Friedman, is attributed with the quote: "Inflation is everywhere and always a monetary phenomenon." Explain its meaning, relate it to the quantity theory of money, and explain the quantity theory of money. B. Why might it be in the federal government's benefit to generate inflation?arrow_forwardMonetarists differ from Classical economists in their view of money in that monetarists believe: (a) The velocity of money is relatively constant over time (b) Prices are not influenced by real GDP (c) Prices are not influenced by the money supply (d) The level of unemployment is directly related to the money supply (e) The velocity of money varies over timearrow_forward
- Using the quantity equation, if the velocity of money grows at 5 percent, the money supply grows at 10 percent, and real GDP grows at 4 percent, then the inflation rate will be...?arrow_forwardWhat is the likely effect on inflation when a central bank increases the money supply rapidly? A. Inflation will decrease. B. Inflation will remain stable. C. Inflation will increase. D. Inflation will first decrease, then increase.arrow_forwardThe economy's unemployment rate is 2% and the inflation rate is 18%. The most appropriate policy for the Governor of the New York Fed to pursue would be: a. do nothing because the unemployment rate is too low.b. increase the money supply to try to reduce the unemployment rate. c. increase the money supply to try and increase the unemployment rate. d. none of the other responses are correct. e. reduce the money supply to try to reduce the inflation rate.arrow_forward
- On which of the following do monetarists and Keynesians disagree? A. Deflation causes unemployment B. Wages are sticky C. High inflation leads to misallocation of resources D. In the short run, an increase in the money supply boosts economic output E. C and Darrow_forwardPlease help on Part C and D.arrow_forwardMilton Friedman, the leader for Monetarism had proposed several important arguments regarding the implementation of Monetary Policy. The arguments were listed as: Proposition 1: Monetary Policy has powerful short-run effects on the real economy. In the long run, however, changes in the money supply have their primary effect on the price level. Proposition 2: Despite the powerful short-run effect of money on the economy, there is little scope for using Monetary Policy actively to try to smooth business cycle. Proposition 3: Even if there is some scope for using Monetary Policy to smooth business cycles, the Central Bank (the Federal Reserve) cannot be relied on to do so effectively. Proposition 4: The Central Bank (the Federal Reserve) should choose a specific monetary aggregate (such as M1 or M2) and commit itself to making that aggregate grow at a fixed percentage rate, year in and year out. Keynesians economists’ response to the above propositions with this statement: “Monetary…arrow_forward
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