Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 25, Problem 26APA
(a)
To determine
Determine the changes in the interest rate, quantities of currency, and M2 occurred between 2006 and 2016.
(b)
To determine
Determine how the change in the interest rate changed the
(c)
To determine
Determine the changes in use of cash and cards when an outbreak of inflation took interest rates to 10% per year.
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Students have asked these similar questions
In the mid 1800's, grain sellers in Chicago would deliver their grain to warehouses and receive a paper receipt that represented their claim on the grain in storage. These receipts became so widely used that grain traders began to use them as money, and they would use the warehouse receipts to settle debts and as collateral to secure short-term loans. Despite their widespread use as a form of currency, the warehouse receipts were not fiat money because:
A.
Grain is a commodity, so the receipts were commodity money and not fiat money
B.
The receipts were not legal tender formally recognized by a government
1. The roles of money
Andrew wants to purchase a new computer and go to the Caribbean for spring break. The computer is priced at $1,299, and the vacation is priced at
$800. He has only $1,574 in his checking account, so he cannot afford to purchase both. After much thought, Andrew buys the computer and writes a
check for $1,299.
Identify what role money plays in each of the following parts of the story.
Hint: Select each role only once.
Role of Money
Andrew can easily determine that the price of the computer is more than the price of
the vacation.
Andrew has $1,574 in his checking account.
Andrew writes a check for $1,299.
Medium of
Exchange
OO
Unit of
Account
Store of
Value
O
OO
Draw a graph and explain what is the overall impact of lower interest rates on the money market
Chapter 25 Solutions
Macroeconomics
Ch. 25.1 - Prob. 1RQCh. 25.1 - Prob. 2RQCh. 25.1 - Prob. 3RQCh. 25.1 - Prob. 4RQCh. 25.1 - Prob. 5RQCh. 25.2 - Prob. 1RQCh. 25.2 - Prob. 2RQCh. 25.2 - Prob. 3RQCh. 25.2 - Prob. 4RQCh. 25.2 - Prob. 5RQ
Ch. 25.3 - Prob. 1RQCh. 25.3 - Prob. 2RQCh. 25.3 - Prob. 3RQCh. 25.3 - Prob. 4RQCh. 25.3 - Prob. 5RQCh. 25.4 - Prob. 1RQCh. 25.4 - Prob. 2RQCh. 25.4 - Prob. 3RQCh. 25.5 - Prob. 1RQCh. 25.5 - Prob. 2RQCh. 25.5 - Prob. 3RQCh. 25.5 - Prob. 4RQCh. 25.5 - Prob. 5RQCh. 25.6 - Prob. 1RQCh. 25.6 - Prob. 2RQCh. 25.6 - Prob. 3RQCh. 25.6 - Prob. 4RQCh. 25 - Prob. 1SPACh. 25 - Prob. 2SPACh. 25 - Prob. 3SPACh. 25 - Prob. 4SPACh. 25 - Prob. 5SPACh. 25 - Prob. 6SPACh. 25 - Prob. 7SPACh. 25 - Prob. 8SPACh. 25 - Prob. 9SPACh. 25 - Prob. 10APACh. 25 - Prob. 11APACh. 25 - Prob. 12APACh. 25 - Prob. 13APACh. 25 - Prob. 14APACh. 25 - Prob. 15APACh. 25 - Prob. 16APACh. 25 - Prob. 17APACh. 25 - Prob. 18APACh. 25 - Prob. 19APACh. 25 - Prob. 20APACh. 25 - Prob. 21APACh. 25 - Prob. 22APACh. 25 - Prob. 23APACh. 25 - Prob. 24APACh. 25 - Prob. 25APACh. 25 - Prob. 26APACh. 25 - Prob. 27APA
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Similar questions
- how might this change in interest rates and the supply of money affect the value of money? What happens in the circular-flow-diagram if borrowing money becomes expensive for businesses and consumers? What happens to employment?arrow_forwardExplain the opportunity cost of holding money and how does it relate to the interest ratesarrow_forwardDue to the huge inflow of money to Spain, price levels have begun to increase. The government worries that this huge money supply will be an economic problem soon. Which of these monetary policies will work to solve this problem? a. Increase cash reserve ratio, increase interest rates and buy government bonds b. Decrease cash reserve ratio, decrease interest rates and sell government bonds c. Decrease cash reserve ratio, increase interest rates and sell government bonds d. Increase cash reserve ratio, increase interest rates and sell government bondsarrow_forward
- In an economy where the central bank implements negative interest rates as a monetary policy tool, what is the most likely short-term impact on consumer savings behavior and bank profitability? A. An increase in consumer savings as people seek to safeguard their money and a rise in bank profitability due to increased lending. B. A decrease in consumer savings as the incentive to save diminishes and a decrease in bank profitability due to lower interest margins. C. No significant change in consumer savings behavior but an improvement in bank profitability due to lower borrowing costs. D. A shift in consumer investment towards riskier assets and challenges in bank profitability due to compressed interest margins. Please don't use chatgpt it is giving wrong answer and please provide valuable answerarrow_forward27.A household buys U.S. government bonds, and at the same time the Federal Reserve (Fed) also buys government bonds. From the standpoint of monetary theory, the key difference between the two transactions is that A: the Fed is putting money into circulation, whereas the household is not. B: the household makes the purchase on the open market. C: the bonds held by the Fed do not need to be repaid at maturity. D: the Fed is putting bonds into circulation, whereas the household is not. C: the Fed requires permission from Congress to make the purchase.arrow_forwardLet's say that you have put $1,000 in your savings account at a local financial institution, and an employee of the banks tells you that the bank does not have the money you deposited in its vault (or anywhere else) in the bank. 1. Could the employee be correct and, if so, then where is the money that you deposited into your savings account? 2. Should you be worried about getting your deposit back from the bank? Why or why not?arrow_forward
- Discuss how the Bank of England can control the money supply and interest rates and then reflect on the above actions taken? Discuss briefly how do interest rates affect the economyarrow_forwardDiscuss the concept of money from the perspective of a consumer and an investor.arrow_forwardWhen the interest rate falls , other things remaining the same, what change occurs in the market for money? The opportunity cost of holding money _______ and _______. A. rises ; the demand for money decreases B. rises ; the quantity of money demanded decreases C. falls ; the quantity of money demanded increases D. falls ; the demand for money increasesarrow_forward
- Use the graph below to answer the following questions: D, is the transactions demand for money, Dm is the total demand for money, and Sm is the supply of money. 1. What is the transactions demand for money in this market? Number 2. What is the asset demand for money if the interest rate is 2 %? 3. If the money market is in equilibrium at 4 %, what change in money supply must occur for the equilibrium rate to change to 2 % (include a negative if a decrease in money supply) Number 4. If the money market is in equilibrium at 6 % and the money supply has increased to Sm3, by how much has total demand for money changed? Number Rate of interest 6 4 0 I I I I Dt I Sm1 Sm2 115 165 215 Quantity of Money Sm3 Number 265 Dmarrow_forwardExplain with the aid of a graph, the impact of a cut in interest rate on the demand for moneyarrow_forwardSuppose you receive Tk. 10,000 from your grandmother and deposits the money in a saving account. your grandmother gave you the money by writing a check on her saving account. Would the maximum increase in the money supply still be what you found it to be in part a) where you received the money from the sky? Why or why not? can anyone explain please why it will changearrow_forward
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