What are the effects of a decrease in the price level? Select one: O a. The real interest rate decreases, the dollar appreciates, and net exports decrease. O b. The real interest rate increases, the dollar depreciates, and net exports decrease. O C. The real interest rate increases, the dollar appreciates, and net exports increase. O d. The real interest rate decreases, the dollar depreciates, and net exports increase. O e. None of the other choices are correct

What are the effects of a decrease in the price level? Select one: O a. The real interest rate decreases, the dollar appreciates, and net exports decrease. O b. The real interest rate increases, the dollar depreciates, and net exports decrease. O C. The real interest rate increases, the dollar appreciates, and net exports increase. O d. The real interest rate decreases, the dollar depreciates, and net exports increase. O e. None of the other choices are correct

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter26: Monetary Policy

Section: Chapter Questions

Problem 3P

See similar textbooks

Similar questions

What is a foreign exchange rate? (a) The rate at which the currency of one country trades for the goods ofanother country.(b) The rate at which one country’s goods trade for those of another country.(c) The rate at which currencies of different countries are exchanged.(d) The rate at which one country’s currency trades for gold provided byanother country. Induced consumption is: (a) the part of consumption which is independent of the level of income.(b) the minimum level of consumption that is financed from sources other than income.(c) The maximum level of consumption that is financed from sources other than income.(d) shown by the slope of the consumption function. In the Keynesian model, an introduction of a proportional tax will: (a) increase the slope of the consumption function.(b) reduce the multiplier.(c) increase the equilibrium level of income.(d) increase the multiplier. A decrease in the price level will: (a) shift the AS curve to the left.(b) shift the AD curve to the…
(a) Suppose the price level in an economy rises while the money wage rate remains constant. What happens to the quantity of real GDP supplied. How will this affect the aggregate supply or aggregate demand curve? What if the potential GDP increases? Which aggregate curve is affected and how? (b) Real GDP Consumption Planned Investment Government Purchases Net Exports $1,000 $1,000 $100 $150 -$50 2,000 1,900 100 150 -50 3,000 2,800 100 150 -50 4,000 3,700 100 150 -50 From the table data provided, answer the following questions. The numbers in the table are in billions of dollars. Show all calculations. a. What is the equilibrium level of real GDP? b. What is the Marginal Propensity to Consume? c. What is the multiplier value in this economy? d. If potential GDP is $4,000 billion, is the economy at full employment? If not, what is the condition of the economy? e. If the economy is…
Price level increasing, causing a movement along the aggregate demand curve, can be explained by: the real value of savings increases. an increase in investment and consumption expenditure. a decrease in interest rates. a decrease in net exports. *Answ: a decrease in net exports. Reason: (As a result of the foreign-purchases effect, an increase in the price level causes the quantity of exports to decrease and the quantity of imports to increases, which means net exports decreases and the aggregate quantity of real GDP demanded decreases.) Explanin in detailstep by step using exaple and graph
In a closed economy with no government, aggregate expenditure is Select one: O a. None of the options O b. Net Tax plus Consumption O c. consumption plus the MPC O d. saving plus investment.
a. Why aggregate demand curve (AD) (showing the relationship between price level (P) and real output/income (Y)) is negatively sloped? Please explain with details by benefiting from; i) wealth effect, ii) interest rate effect, and iii) exchange rate effect. What are the slopes of FE line and LRAS curve? Their place shows what level of output? Which factors cause these curves to shift ?
Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy�s multiplier is 3. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? The aggregate demand curve will shift_____ by $____ billion. In what direction and by how much will it eventually shift? The aggregate demand curve will shift_____ by $____ billion..
4w=180 b=0.75 g=90 tax=90 nx=-50 i=300-10r central bank reserves are gold=100 f. currencies 200 l.currencies 150 t-bills 500 rrr=0.2 md=5000-50r calculate the equilibrium gdp (y). if ypot=1700 by how much should the central bank change the rrr to attain potential if instead the central bank will involves open market operations in order to attain potential. by how much should it increase or decrease t-bills
1. Suppose the labor market is initially at its equilibrium, i.e., labor supplied equals labor demanded. Explain and show graphically the effects of an increase in the economy’s capital stock. Please draw the full graph and provide a detailed explanation of the effect. Label the axes and explain why either the labor demand curve or the labor supply curve shifts. 2. Suppose the goods market is initially at its equilibrium, i.e., the desired level of national saving equals the desired level of investment. Explain and show graphically how an increase of the effective tax rate on capital goods affects the goods market equilibrium. Please draw the full graph and provide a detailed explanation of the effect. Label the axes and explain why either the saving curve or the investment curve shifts.
Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy's multiplier is 4. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? In what direction and by how much will it eventually shift?
If countries that imported goods and services from the United States went into recession, we would expect that U.S. net exports would a rise, making aggregate demand shift left. b rise, making aggregate demand shift right. c fall, making aggregate demand shift left. d fall, making aggregate demand shift right.
Suppose the government provides incentives (e.g. lower company tax) to firms that engage in high levels of research and development.How would this affect firms’ allocation between different types of investment? Explain. How would this affect the interest rate? Explain. What happens to the quantity of investment overall? Explain.What happens to the short-run aggregate supply curve? Explain. What happens to the long-run aggregate supply curve? Explain. What happens to the value of the dollar? Explain.g What happens to the quantity of net exports demanded? Explain.h What happens to aggregate demand? Explain.
Refer to the table below. Real Output Demanded, Billions Price Level Real Output Supplied, Billions $ 506 108 $ 513 508 104 512 510 100 510 512 96 507 514 92 502 Instructions: Enter your anwers as whole numbers. A). What is the equilibrium level of output? What is the equilibrium price level? B). Suppose that aggregate demand increases such that the amount of real output demanded rises by $ 7 billion at each price level. Insert the new values for real output demanded in the table below. Real Output Demanded, Billions New Real Output Demanded, Billions Price Level Real Output Supplied, Billions $ 506 108 $ 513 508 104 512 510 100 510 512 96 507 514 92 502 What is the new equilibrium level of output? What is the new equilibrium price level? By what percentage will the price level increase? Will this inflation be demand-pull inflation or will it be cost-push inflation? C) If potential real GDP ( that is, full-employment GDP) is $ 510…