According to the quantity theory of money, if the long-run economic growth rate is 2.5%, by how much should the Fed increase the money supply if it wants inflation to be 2%?

Q: If the demand for money depends positively on real income and depends inversely on the nominal…

A: The money demand is a downward sloping curve which shows the relation between the money demand and…

Q: If the central bank increases the discount rate it charges when it makes loans to banks, then the…

A: Due to increase in interest rate,monetary base and money supply would decrease.

Q: The U.S. Treasury maintains accounts at commercial banks. What would be the consequences for the…

A: The deposits that a commercial bank receives is a liability that needs to be repaid, that the bank…

Q: Which of the following is not a function of the Fed? Accepting deposits from banks Making loans to…

A: The Central bank performs all the monetary activities, i.e., the activities relating to money…

Q: List three main tools available to the Fed to change money supply in the economy. Which tool do you…

A: Federal reserve system also known as Fed is the central bank of the USA managing and handling the…

Q: Why does the Fed manipulate the money supply?

A: The Fed is the central bank of country. The Fed is foremost financial institution in the country. It…

Q: How would each of the following affect the demand for money? a tax on bonds held by individuals a…

A:

Q: Why is the money supply curve vertical?

A: The quantity theory of money refers to the theory of money which assumes that the quantity of money…

Q: Does the Quantity Theory of Money adequately explain the cause of inflation?

A: The quantity theory of money assumes that the amount of money in a country has more influence on its…

Q: How would each of the following affect the demand for money?a forecast by the Central bank that…

A: Equilibrium interest rate: The interest rate at which money supply is equal to the money demanded in…

Q: Based on Keynesian economic theory, which of the following will occur if the Central Bank increases…

A: According to keynesian theory,when money supply increases;investment demand increases and real…

Q: why is the speculative demand for money an inverse relationship between interest rates and the…

A:

Q: If an economy is operating at full employment and there is a substantial increase in the money…

A: Full employment: - Full employment is that level of employment where the maximum possible labor…

Q: Using the quantity​ equation, if the velocity of money grows at 5​ percent, the money supply grows…

A: The quantity theory of money refers to the relationship between output, prices, and money that is…

Q: The Fed wants to decrease the money supply when the economy is booming and inflationary pressures…

A: The money supply in an economy is controlled by the central bank of the economy. The central bank…

Q: Describe the tools used by the Fed since March 2020, including some new non-traditional tools. What…

A: The economic downturn precipitated by the US coronavirus epidemic led to the closure of numerous…

Q: If the central bank increases the money supply, then in the short run prices   rise and unemployment…

A: The Federal Reserve is the central bank that is the sole owner and regulator of the money supply in…

Q: If velocity is constant and nominal GDP increases by 5% what is happening to the money supply?please…

A: Money Supply:- The money supply refers to the the entire amount of cash and other liquid assets in a…

Q: Which of the following is NOT a method by which the Fed increases the money supply?   a)…

A: In the United States, Federal Reserve can implement monetary policy to make changes in the money…

Q: If inflation is 5%, the real growth rate is 3%, and the change in velocity is 2%, then the increase…

A: Quantity Theory of Money (QTM) reflects that the change in the price level or inflation is directly…

Q: Which of the following would NOT result in a decreased money supply?

A: Supply of the money in an economy is an important factor causing fluctuation in the economy. An…

Q: According to the quantity theory of​ money, what must the growth rate of the money supply be given…

A: The Quantity-Theory-of-Money(QTM) dictates that the money-supply in the nation and the…

Q: If the central bank wants to achieve a long-run target inflation rate of p, at what rate should the…

A: A money demand function displays the influence that some aggregate economic variable will have on…

Q: Evaluate the Quantity theory of Money and how it explains the relationship between inflation  and…

A:

Q: Explain why a fall in the purchasing power of money reflects a rise in inflation.

A: The purchasing power (PP) of money reflects the goods and services it can buy. A fall in the…

Q: . What is the opportunity cost of holding money? How is k related to the velocity of money? . Use…

A: The answer and explanation for both these parts is as follows:-

Q: Using the theory of aggregate demand, aggregate supply, and liquidity preference, what will happen…

A: The money supply is the total money that is there in the economy to spend. It is the total money in…

Q: Discuss the importance of monetary base to the overall money supply.

A: Money supply includes all liquidated instruments and currency in form of deposits and cash being…

Q: What happens to the money supply if the Fed decreases the reserve requirement?     There is no…

A: Reserve requirements is the important factor to determine the money supply.

Q: How does money velocity contribute to the observation that in countries with high rates of…

A: The rate at which money is traded in an economy is measured by the velocity of money. It refers to…

Q: If the Fed buys government bonds from a bank, money supply rises by the amount of the Fed purchase

A: A government bond is an obligation security gave by an administration to help government spending…

Q: An economy has a money supply of 1,052, money velocity of 10, and output of 1,048. How much will the…

A: Answer: Given, Money supply (M) = 1,052 Money velocity (V) = 10 Output (Y) = 1,048 Let us use the…

Q: Explain why Monetarists believe the Fed should have expanded the money supply during the Great…

A: Monetarist give importance to money in an economy.

Q: Why does the Fed manipulate the money supply ?

A: Answer: Introduction: Fed is the central bank of America. It is responsible for controlling…

Q: Which of the following statements help to explain why, in the real world, the Fed cannot precisely…

A: Federal bank is a governing body that controls the monetary policy or money supply in the economy.…

Q: In countries that have experienced hyperinflation, what role have large government budget deficits…

A: To answer the first part of the question, we have to understand the concepts of hyperinflation,…

Q: Consider the following simple monetary rules estimated for two different periods, 1969-1985 and…

A: Taylor Rule is defined as a formula which used to predict how the Central Bank would make changes in…

Q: Suppose that the money supply and the nominal GDP for a hypothetical economy are $96 billion and…

A: Money supply : $96 billion. Nominal GDP : $336 billion.

Q: The demand curve for money is downward sloping because what?

A: The demand for money arises as people decide to hold their money in the form of cash or bank…

Q: With respect to controlling the money supply,the law requires the Fed to take orders from   a)the…

A: The federal reserve is the central bank of the United States and it works with the objective of…