To explain:The way in which the
Concept Introduction:
The Federal Reserve manages the supply of the money and money aggregates in the economy. They increase money supply to stimulate output and employment in the economy. However, an increase in money supply also affects the price level in the economy. The Fed does this through open market purchase of U.S. government securities or by printing money. This increase in money supply results with a decrease in the interest rates. However, such money supply has major effect on the real
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- Explain how to use the discount rate to expand the money supply.arrow_forwardThe Bring it Home Feature discusses the use of cowrie shells as money. Although we no longer use cowrie shells as money, do you think other forms of commodity monies are possible? What role might technology play in our definition of money?arrow_forwardExplain the THREE (3) types of demand for money.arrow_forward
- Based on these motives, what variables did he think determined the demand for money? (Check all that apply.) A. Nominal interest rate. B. Income. C. Price level. D. The risk of losing money.arrow_forwardWhen the interest rate falls , other things remaining the same, what change occurs in the market for money? The opportunity cost of holding money _______ and _______. A. rises ; the demand for money decreases B. rises ; the quantity of money demanded decreases C. falls ; the quantity of money demanded increases D. falls ; the demand for money increasesarrow_forwardNeed help asap 1. Using a supply and demand diagram for each of the following scenarios, show how the market for money is affected in the long run. Explain your answer. (a) Everyone subscribes to r/WallStreetSilver, and starts investing in silver and gold. (b) Commercial banks raise their mortgage rates, even though the Bank of Canada retains a low Bank Rate. (c) The Bank of Canada prints money and mails $1,000 to every Canadian.arrow_forward
Principles of Macroeconomics (MindTap Course List)EconomicsISBN:9781305971509Author:N. Gregory MankiwPublisher:Cengage Learning