Question 8 (05.03 MC) If the money supply in an economy is $750 billion, the velocity of money is constant at 3, and the price level is 5, then what will be the country's real output? The nominal GDP is $250 billion. The real GDP is $50 billion. The nominal GDP is $150 billion. The real GDP is $450 billion. The real GDP is $750 billion.
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Question 8
(05.03 MC)
If the money supply in an economy is $750 billion, the velocity of money is constant at 3, and the
The nominal
The real GDP is $50 billion.
The nominal GDP is $150 billion.
The real GDP is $450 billion.
The real GDP is $750 billion.
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- An increase in the money supply Question 36 options: a) lowers the interest rate, causing a decrease in consumption spending, and an increase in real GDP b) lowers the interest rate, causing an increase in consumption spending, and a decrease in real GDP c) lowers the interest rate, causing an increase in consumption spending, and an increase in real GDP d) raises the interest rate, causing an decrease in consumption spending, and a decrease in real GDPExplain the links between changes in the nation’s money supply, the interest rate, investment spending, aggregate demand, and real GDP (and the price level).60) Use the money demand and money supply model to show the money market in equilibrium with an interest rate of 5 percent and the quantity of money of $800 billion. Suppose the Federal Reserve increases the money supply to $850 billion. At the previous equilibrium interest rate of 5 percent, will households and firms now be holding more money or less money than they want to hold, and will they be buying or selling short-term financial assets? At the new equilibrium interest rate, households and firms will desire to hold the entire $850 billion of the money supply. What causes households and firms to want to hold the additional $50 billion of the money supply? 61) Use the money demand and money supply model to show graphically and briefly explain the effect on the interest rate if real GDP increases. 1
- Suppose real GDP is equal to $100 trillion, the money supply is equal to $50 trillion and the price level is equal to 2. In this case, the velocity of money is equal to ________.Q47 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.Consider an economy for which the current GDP is $800 billion, “the” multiplier is 3, the income multiplier with respect to the money supply is 4, the money multiplier is 5, the marginal tax rate is 20%, the real interest rate is 3%, the current budget deficit is $30 billion, the long‐run real rate of growth is 2%, the current money supply is $200 billion, the rate of money supply growth is 10%, and financial innovations are decreasing money demand by 1% per year. Marks are given for your explanations, not the final answer. What should be the long‐run rate of inflation? What should be the price of a T‐bill due to mature in six months at its face value of $1,000?
- Which of the following is correct? The demand for money *a. increases as real GDP increases.b. increases when the interest rate increases.c. depends on the quantity of money.d. decreases as the price level increasesWhich statement concerning the transactions demand for money is true? The transactions demand for money and the demand for bonds are positively related. An increase in the transactions demand for money should lead to an increase in the interest rate and an increase in the price of bonds. Assuming that an individual retires and his income is reduced, that individual’s transactions demand for money should fall. A decrease in national income should lead to an increase in the transactions demand for money.The following graph represents the money market for some hypothetical economy. This economy is similar to the United States in the sense that it has a central bank called the Fed, but a major difference is that this economy is closed (and therefore does not have any interaction with other world economies). The money market is currently in equilibrium at an interest rate of 3% and a quantity of money equal to $0.4 trillion, designated on the graph by the grey star symbol. Suppose the Fed announces that it is raising its target interest rate by 75 basis points, or 0.75 percentage points. To do this, the Fed will use open-market operations to (increase/decrease) the (demand for/supply for) money by (buying bonds from/selling bonds to) the public. Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing the new money supply curve (MS) in the correct location. Place the black point (plus symbol) at the new equilibrium interest rate…
- the table below has the demand for money schedule. if the central bank supplies $ 1.1 trillion dollars, what is the equilibrium interest rate? if the interest rate is 6 percent and central bank supplies $1.0 trillion dollars, what will happen to the price of bonds and interest rates? what is the equilibrium condition for the money market? what is the interest rate in the demand for money? interest rate (percent per year) Quantity of money demanded(trillions of 2005 dollars) 8 0.7 6 0.9 4 1.1 2 1.3 Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure.What happen to the money market equilibrium when the Fed raises its interest rate target to 6 percent a year following the increase in real GDP? The interest rate _______ and the equilibrium quantity of money _______. A. remains at 5 percent; increases B. rises to between 5 and 6 percent; decreases C. rises from 5 to 6 percent; decreases D. rises from 5 to 6 percent; might increase, decrease, or not changeWhich one of the following statements is NOT true? (a) Money is the most liquid asset.(b) Money is a store of value.(c) Money is a unit of account.(d) Money is another term for income.Q.1.6 Which of the following will cause the demand curve for money to shift to the right?(a) An increase in real Gross Domestic Product (GDP).(b) A decrease in the repo rate.(c) An increase in the quantity of money available.(d) A decrease in the quantity of money available.Q.1.7 A budget deficit occurs when: (a) there is an increase in taxation.(b) government spends less than is generated by taxation.(c) government spending is very high.(d) Government spends more than is generated by taxation.