Economic expansion and the demand for money.

Question

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Answer 1

Question

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

Chapter 11, Problem 1P

(a)

To determine

Economic expansion and the demand for money.

(a)

Expert Solution

Explanation of Solution

The expansion of the real economy is the period of economic growth. An economic growth in an economy brings the availability of more goods and services. Therefore, people demand more. Thus, when the economy expands, the demand for money also increases but the economic expansion does not increase the money supply but remains the same. Hence, the given statement is incorrect.

Economics Concept Introduction

Money supply: Money supply refers to the total amount of monetary assets circulating in an economy during a particular period of time.

Demand for money: The demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

(b)

To determine

Inflation and the demand for money.

(b)

Expert Solution

Explanation of Solution

Inflation is an economic situation where the general price level increases and the purchasing power of people decreases. As a result, people need to hold more money to purchase the same amount of goods and services. Hence, the inflation causes the demand for money to increase. Thus, the given statement is false.

Economics Concept Introduction

Demand for money: Demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

(c)

To determine

Open market operations and the demand for money.

(c)

Expert Solution

Explanation of Solution

In the open market operations when the Fed purchases the bonds, it leads to increase the money supply in an economy. On the other side, in the recession period, economic activities fall down and people do not have enough money to demand for goods and services. Therefore, the demand for money will decline in the recession. This increasing supply of money and decreasing demand for money will force the interest rate to decrease in the economy. Hence, the given statement is incorrect.

Economics Concept Introduction

Money supply: Money supply refers to the total amount of monetary assets circulating in an economy during a particular period of time.

Demand for money: Demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

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Answer 2

Question

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

Chapter 11, Problem 1P

(a)

To determine

Economic expansion and the demand for money.

(a)

Expert Solution

Explanation of Solution

The expansion of the real economy is the period of economic growth. An economic growth in an economy brings the availability of more goods and services. Therefore, people demand more. Thus, when the economy expands, the demand for money also increases but the economic expansion does not increase the money supply but remains the same. Hence, the given statement is incorrect.

Economics Concept Introduction

Money supply: Money supply refers to the total amount of monetary assets circulating in an economy during a particular period of time.

Demand for money: The demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

(b)

To determine

Inflation and the demand for money.

(b)

Expert Solution

Explanation of Solution

Inflation is an economic situation where the general price level increases and the purchasing power of people decreases. As a result, people need to hold more money to purchase the same amount of goods and services. Hence, the inflation causes the demand for money to increase. Thus, the given statement is false.

Economics Concept Introduction

Demand for money: Demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

(c)

To determine

Open market operations and the demand for money.

(c)

Expert Solution

Explanation of Solution

In the open market operations when the Fed purchases the bonds, it leads to increase the money supply in an economy. On the other side, in the recession period, economic activities fall down and people do not have enough money to demand for goods and services. Therefore, the demand for money will decline in the recession. This increasing supply of money and decreasing demand for money will force the interest rate to decrease in the economy. Hence, the given statement is incorrect.

Economics Concept Introduction

Money supply: Money supply refers to the total amount of monetary assets circulating in an economy during a particular period of time.

Demand for money: Demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

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Answer 3

Question

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

Chapter 11, Problem 1P

(a)

To determine

Economic expansion and the demand for money.

(a)

Expert Solution

Explanation of Solution

The expansion of the real economy is the period of economic growth. An economic growth in an economy brings the availability of more goods and services. Therefore, people demand more. Thus, when the economy expands, the demand for money also increases but the economic expansion does not increase the money supply but remains the same. Hence, the given statement is incorrect.

Economics Concept Introduction

Money supply: Money supply refers to the total amount of monetary assets circulating in an economy during a particular period of time.

Demand for money: The demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

(b)

To determine

Inflation and the demand for money.

(b)

Expert Solution

Explanation of Solution

Inflation is an economic situation where the general price level increases and the purchasing power of people decreases. As a result, people need to hold more money to purchase the same amount of goods and services. Hence, the inflation causes the demand for money to increase. Thus, the given statement is false.

Economics Concept Introduction

Demand for money: Demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

(c)

To determine

Open market operations and the demand for money.

(c)

Expert Solution

Explanation of Solution

In the open market operations when the Fed purchases the bonds, it leads to increase the money supply in an economy. On the other side, in the recession period, economic activities fall down and people do not have enough money to demand for goods and services. Therefore, the demand for money will decline in the recession. This increasing supply of money and decreasing demand for money will force the interest rate to decrease in the economy. Hence, the given statement is incorrect.

Economics Concept Introduction

Money supply: Money supply refers to the total amount of monetary assets circulating in an economy during a particular period of time.

Demand for money: Demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

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Answer 4

Question

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

Chapter 11, Problem 1P

(a)

To determine

Economic expansion and the demand for money.

(a)

Expert Solution

Explanation of Solution

The expansion of the real economy is the period of economic growth. An economic growth in an economy brings the availability of more goods and services. Therefore, people demand more. Thus, when the economy expands, the demand for money also increases but the economic expansion does not increase the money supply but remains the same. Hence, the given statement is incorrect.

Economics Concept Introduction

Money supply: Money supply refers to the total amount of monetary assets circulating in an economy during a particular period of time.

Demand for money: The demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

(b)

To determine

Inflation and the demand for money.

(b)

Expert Solution

Explanation of Solution

Inflation is an economic situation where the general price level increases and the purchasing power of people decreases. As a result, people need to hold more money to purchase the same amount of goods and services. Hence, the inflation causes the demand for money to increase. Thus, the given statement is false.

Economics Concept Introduction

Demand for money: Demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

(c)

To determine

Open market operations and the demand for money.

(c)

Expert Solution

Explanation of Solution

In the open market operations when the Fed purchases the bonds, it leads to increase the money supply in an economy. On the other side, in the recession period, economic activities fall down and people do not have enough money to demand for goods and services. Therefore, the demand for money will decline in the recession. This increasing supply of money and decreasing demand for money will force the interest rate to decrease in the economy. Hence, the given statement is incorrect.

Economics Concept Introduction

Money supply: Money supply refers to the total amount of monetary assets circulating in an economy during a particular period of time.

Demand for money: Demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 11, Problem 1P

(a)

To determine

Economic expansion and the demand for money.

(a)

Expert Solution

Explanation of Solution

The expansion of the real economy is the period of economic growth. An economic growth in an economy brings the availability of more goods and services. Therefore, people demand more. Thus, when the economy expands, the demand for money also increases but the economic expansion does not increase the money supply but remains the same. Hence, the given statement is incorrect.

Economics Concept Introduction

Money supply: Money supply refers to the total amount of monetary assets circulating in an economy during a particular period of time.

Demand for money: The demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

(b)

To determine

Inflation and the demand for money.

(b)

Expert Solution

Explanation of Solution

Inflation is an economic situation where the general price level increases and the purchasing power of people decreases. As a result, people need to hold more money to purchase the same amount of goods and services. Hence, the inflation causes the demand for money to increase. Thus, the given statement is false.

Economics Concept Introduction

Demand for money: Demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

(c)

To determine

Open market operations and the demand for money.

(c)

Expert Solution

Explanation of Solution

In the open market operations when the Fed purchases the bonds, it leads to increase the money supply in an economy. On the other side, in the recession period, economic activities fall down and people do not have enough money to demand for goods and services. Therefore, the demand for money will decline in the recession. This increasing supply of money and decreasing demand for money will force the interest rate to decrease in the economy. Hence, the given statement is incorrect.

Economics Concept Introduction

Money supply: Money supply refers to the total amount of monetary assets circulating in an economy during a particular period of time.

Demand for money: Demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

Answer 6

Chapter 11, Problem 1P

(a)

To determine

Economic expansion and the demand for money.

(a)

Expert Solution

Explanation of Solution

The expansion of the real economy is the period of economic growth. An economic growth in an economy brings the availability of more goods and services. Therefore, people demand more. Thus, when the economy expands, the demand for money also increases but the economic expansion does not increase the money supply but remains the same. Hence, the given statement is incorrect.

Economics Concept Introduction

Money supply: Money supply refers to the total amount of monetary assets circulating in an economy during a particular period of time.

Demand for money: The demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

Answer 7

Chapter 11, Problem 1P

(a)

To determine

Economic expansion and the demand for money.

Answer 8

(a)

Expert Solution

Explanation of Solution

The expansion of the real economy is the period of economic growth. An economic growth in an economy brings the availability of more goods and services. Therefore, people demand more. Thus, when the economy expands, the demand for money also increases but the economic expansion does not increase the money supply but remains the same. Hence, the given statement is incorrect.

Answer 9

(a)

Expert Solution

Answer 10

(a)

Expert Solution

Answer 11

Expert Solution

Answer 12

Economics Concept Introduction

Money supply: Money supply refers to the total amount of monetary assets circulating in an economy during a particular period of time.

Demand for money: The demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

Answer 13

(b)

To determine

Inflation and the demand for money.

(b)

Expert Solution

Explanation of Solution

Inflation is an economic situation where the general price level increases and the purchasing power of people decreases. As a result, people need to hold more money to purchase the same amount of goods and services. Hence, the inflation causes the demand for money to increase. Thus, the given statement is false.

Economics Concept Introduction

Demand for money: Demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

Answer 14

(b)

To determine

Inflation and the demand for money.

Answer 15

(b)

Expert Solution

Explanation of Solution

Inflation is an economic situation where the general price level increases and the purchasing power of people decreases. As a result, people need to hold more money to purchase the same amount of goods and services. Hence, the inflation causes the demand for money to increase. Thus, the given statement is false.

Answer 16

(b)

Expert Solution

Answer 17

(b)

Expert Solution

Answer 18

Expert Solution

Answer 19

Economics Concept Introduction

Demand for money: Demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

Answer 20

(c)

To determine

Open market operations and the demand for money.

(c)

Expert Solution

Explanation of Solution

In the open market operations when the Fed purchases the bonds, it leads to increase the money supply in an economy. On the other side, in the recession period, economic activities fall down and people do not have enough money to demand for goods and services. Therefore, the demand for money will decline in the recession. This increasing supply of money and decreasing demand for money will force the interest rate to decrease in the economy. Hence, the given statement is incorrect.

Economics Concept Introduction

Money supply: Money supply refers to the total amount of monetary assets circulating in an economy during a particular period of time.

Demand for money: Demand for money refers to the amount of money that households and firms desire to hold at different nominal interest rates.

Answer 21

(c)

To determine

Open market operations and the demand for money.

Answer 22

(c)

Expert Solution

Explanation of Solution

In the open market operations when the Fed purchases the bonds, it leads to increase the money supply in an economy. On the other side, in the recession period, economic activities fall down and people do not have enough money to demand for goods and services. Therefore, the demand for money will decline in the recession. This increasing supply of money and decreasing demand for money will force the interest rate to decrease in the economy. Hence, the given statement is incorrect.