Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 28, Problem 6MCQ
To determine
Result of an increase in the quantity of money, other things remaining the same.
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What is the demand for money?
When the nominal interest rate rises, does the opportunity cost of holding money increase or decrease? Does the quantity of money demanded increase or decrease?
The demand for money is the relationship between the quantity of money demanded and the _______ when all other influences on the amount of money that people wish to hold remain the same.
A.
price of bonds
B.
real interest rate
C.
inflation rate
D.
nominal interest rate
When the nominal interest rate rises, the opportunity cost of holding money _______ and the quantity of money demanded _______.
A.
falls; increases
B.
rises; decreases
C.
falls; decreases
D.
rises; increases
An increase in ________ decreases the quantity of money people want to hold.
a. the price level
b. real GDP
c. the interest rate
d. the quantity of money
Q: Suppose that when everyone wakes up tomorrow, they discover that the government has given them an additional amount of money equal to the amount they already had. Explain what effect this doubling of the money supply will likely have on the following:a. The total amount spent on goods and servicesb. The quantity of goods and services purchased if prices are stickyc. The prices of goods and services if prices can adjust
Chapter 28 Solutions
Foundations of Economics (8th Edition)
Ch. 28 - Prob. 1SPPACh. 28 - Prob. 2SPPACh. 28 - Prob. 3SPPACh. 28 - Prob. 4SPPACh. 28 - Prob. 5SPPACh. 28 - Prob. 6SPPACh. 28 - Prob. 7SPPACh. 28 - Prob. 8SPPACh. 28 - Prob. 9SPPACh. 28 - Prob. 10SPPA
Ch. 28 - Prob. 11SPPACh. 28 - Prob. 1IAPACh. 28 - Prob. 2IAPACh. 28 - Prob. 3IAPACh. 28 - Prob. 4IAPACh. 28 - Prob. 5IAPACh. 28 - Prob. 6IAPACh. 28 - Prob. 7IAPACh. 28 - Prob. 8IAPACh. 28 - Prob. 9IAPACh. 28 - Prob. 10IAPACh. 28 - Prob. 11IAPACh. 28 - Prob. 12IAPACh. 28 - Prob. 1MCQCh. 28 - Prob. 2MCQCh. 28 - Prob. 3MCQCh. 28 - Prob. 4MCQCh. 28 - Prob. 5MCQCh. 28 - Prob. 6MCQCh. 28 - Prob. 7MCQCh. 28 - Prob. 8MCQ
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- The demand for money is the relationship between the quantity of money demanded and the when all other influences on the amount of money that people wish to remain the same. A. quantity of output; spend B. real interest rate; hold C. nominal interest rate; hold D. real wage rate; spend Click to select your answer. MacBook DII DD 20 888 000 F11 F12 F10 F7 F8 F9 F5 F6 esc F3 F4 F1 F2 & ! # 2 3 4 5 7 8 1 { Q W E R T Y ab K L D F G M %24arrow_forwardQUESTION 5 1. According to the quantity theory of money, a 10% increase in the quantity of money ultimately leads to a 10% increase in a. disposable income b. real GDP c. unemployment rate d. the price levelarrow_forward2. What is the relationship between the price level and the value of money? Which variable (s) will be affected if the money supply increases in the economy?arrow_forward
- Milton Friedman argued that the Fed's control over the money supply could be used to peg a. the level of a nominal or real variable, but not the growth rate of a real or nominal variable. b. the level or growth rate of a real variable, but not the level or growth rate of a nominal variable. c. the level or growth rate of a nominal variable, but not the level or growth rate of a real variable. d. both levels and growth rates of both real and nominal variables.arrow_forwardConsider a simple economy that produces only pens. The following table contains information on the economy's money supply, velocity of money, price level, and output. For example, in 2018, the money supply was $200, the price of a pen was $5.00, and the economy produced 400 pens. Fill in the missing values in the following table, selecting the answers closest to the values you calculate. Quantity of Money Price Level Quantity of Output Nominal GDP Year (Dollars) Velocity of Money (Dollars) (Pens) (Dollars) 2018 200 5.00 400 2019 202 10 400 The money supply grew at a rate of from 2018 to 2019. Since pen output did not change from 2018 to 2019 and the velocity of money , the change in the money supply was reflected in changes in the price level. The inflation rate from 2018 to 2019 wasarrow_forwardWhat is the effect of a rise in the U.S. price level on the buying power of money? The buying power of money _______. A. increases and aggregate demand increases B. increases and the quantity of real GDP demanded increases C. decreases and the quantity of real GDP demanded decreases D. decreases and aggregate demand decreasesarrow_forward
- 1.Explain the quantity theory Answer the following questions: of money. Make sure to explain the relationship between money demand, money supply, and quantity of money.arrow_forwardWhen the money market is depicted in a diagram with the value of money on the vertical axis, what would shift money demand to the left? a. an increase in the price level b. a decrease in the price level c. a decrease in real GDP d. an increase in real GDP ہےarrow_forwardAccording to the quantity theory of money, a. V and M are constant. b. V and Y are not affected by the quantity of money. c. V and P are not affected by the quantity of money. d. V and M are not affected by changes in the price level.arrow_forward
- If the price level increased, then ceteris paribus: O The real value of money would fall O The nominal value of money would fall The real value of money would rise O The nominal value of money would risearrow_forwardQ47 Which of the following is the definition for the real supply of money? Select one: a. the actual quantity of money, rather than the officially reported quantity. b. the stock of high powered money only. c. the ratio of the real GDP to the nominal money supply. d. the stock of money measured in terms of goods, not dollars.arrow_forward7. Consider the money demand in the money market model. Interest rate R changed. But the nominal money demand did not change because the price P fell. Answer how the interest rate change: Decreased or Increased, and answer how the real money demand would change: Decrease, Increase, or No change. Change in interest rate: Change in real money demand:arrow_forward
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