Monetary Policy: This policy is used by the central bank to control the liquidity of money from an economy to bring the economy to a stable condition. This is done through management of interest rate and the money supply.

Question

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Answer 1

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 30, Problem 1BCQ

To determine

Concept Introduction:

Monetary Policy: This policy is used by the central bank to control the liquidity of money from an economy to bring the economy to a stable condition. This is done through management of interest rate and the money supply.

Expert Solution & Answer

Explanation of Solution

In the given case G, who can determine trends of financial market very efficiently, heads P. After the investment of G, in bond market of the U.S it is predicted that the interest rate will decrease in near future.
When there is a rise in unemployment, the inflation will fall and when there is a fall in unemployment, the inflation rate will rise. This is because the employment of people increases their ability to spend more which increases money supply in the economy which ultimately results in inflation. Therefore inflation and unemployment holds inverse relationship.
With a fall in inflation, it is predicted that the interest rate will fall to increase the liquid money. Therefore, according to the prediction, to increase the money supply in the economy the government will reduce the interest rate so that money demand can increase.

Conclusion:

Thus, to increase the money demand the interest rate will fall.

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Answer 2

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 30, Problem 1BCQ

To determine

Concept Introduction:

Monetary Policy: This policy is used by the central bank to control the liquidity of money from an economy to bring the economy to a stable condition. This is done through management of interest rate and the money supply.

Expert Solution & Answer

Explanation of Solution

In the given case G, who can determine trends of financial market very efficiently, heads P. After the investment of G, in bond market of the U.S it is predicted that the interest rate will decrease in near future.
When there is a rise in unemployment, the inflation will fall and when there is a fall in unemployment, the inflation rate will rise. This is because the employment of people increases their ability to spend more which increases money supply in the economy which ultimately results in inflation. Therefore inflation and unemployment holds inverse relationship.
With a fall in inflation, it is predicted that the interest rate will fall to increase the liquid money. Therefore, according to the prediction, to increase the money supply in the economy the government will reduce the interest rate so that money demand can increase.

Conclusion:

Thus, to increase the money demand the interest rate will fall.

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Answer 3

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 30, Problem 1BCQ

To determine

Concept Introduction:

Monetary Policy: This policy is used by the central bank to control the liquidity of money from an economy to bring the economy to a stable condition. This is done through management of interest rate and the money supply.

Expert Solution & Answer

Explanation of Solution

In the given case G, who can determine trends of financial market very efficiently, heads P. After the investment of G, in bond market of the U.S it is predicted that the interest rate will decrease in near future.
When there is a rise in unemployment, the inflation will fall and when there is a fall in unemployment, the inflation rate will rise. This is because the employment of people increases their ability to spend more which increases money supply in the economy which ultimately results in inflation. Therefore inflation and unemployment holds inverse relationship.
With a fall in inflation, it is predicted that the interest rate will fall to increase the liquid money. Therefore, according to the prediction, to increase the money supply in the economy the government will reduce the interest rate so that money demand can increase.

Conclusion:

Thus, to increase the money demand the interest rate will fall.

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Answer 4

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 30, Problem 1BCQ

To determine

Concept Introduction:

Monetary Policy: This policy is used by the central bank to control the liquidity of money from an economy to bring the economy to a stable condition. This is done through management of interest rate and the money supply.

Expert Solution & Answer

Explanation of Solution

In the given case G, who can determine trends of financial market very efficiently, heads P. After the investment of G, in bond market of the U.S it is predicted that the interest rate will decrease in near future.
When there is a rise in unemployment, the inflation will fall and when there is a fall in unemployment, the inflation rate will rise. This is because the employment of people increases their ability to spend more which increases money supply in the economy which ultimately results in inflation. Therefore inflation and unemployment holds inverse relationship.
With a fall in inflation, it is predicted that the interest rate will fall to increase the liquid money. Therefore, according to the prediction, to increase the money supply in the economy the government will reduce the interest rate so that money demand can increase.

Conclusion:

Thus, to increase the money demand the interest rate will fall.

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

Answer 5

Chapter 30, Problem 1BCQ

To determine

Concept Introduction:

Monetary Policy: This policy is used by the central bank to control the liquidity of money from an economy to bring the economy to a stable condition. This is done through management of interest rate and the money supply.

Expert Solution & Answer

Explanation of Solution

In the given case G, who can determine trends of financial market very efficiently, heads P. After the investment of G, in bond market of the U.S it is predicted that the interest rate will decrease in near future.
When there is a rise in unemployment, the inflation will fall and when there is a fall in unemployment, the inflation rate will rise. This is because the employment of people increases their ability to spend more which increases money supply in the economy which ultimately results in inflation. Therefore inflation and unemployment holds inverse relationship.
With a fall in inflation, it is predicted that the interest rate will fall to increase the liquid money. Therefore, according to the prediction, to increase the money supply in the economy the government will reduce the interest rate so that money demand can increase.

Conclusion:

Thus, to increase the money demand the interest rate will fall.

Answer 6

Chapter 30, Problem 1BCQ

To determine

Concept Introduction:

Monetary Policy: This policy is used by the central bank to control the liquidity of money from an economy to bring the economy to a stable condition. This is done through management of interest rate and the money supply.

Expert Solution & Answer

Explanation of Solution

In the given case G, who can determine trends of financial market very efficiently, heads P. After the investment of G, in bond market of the U.S it is predicted that the interest rate will decrease in near future.
When there is a rise in unemployment, the inflation will fall and when there is a fall in unemployment, the inflation rate will rise. This is because the employment of people increases their ability to spend more which increases money supply in the economy which ultimately results in inflation. Therefore inflation and unemployment holds inverse relationship.
With a fall in inflation, it is predicted that the interest rate will fall to increase the liquid money. Therefore, according to the prediction, to increase the money supply in the economy the government will reduce the interest rate so that money demand can increase.

Conclusion:

Thus, to increase the money demand the interest rate will fall.

Answer 7

Chapter 30, Problem 1BCQ

To determine

Concept Introduction:

Monetary Policy: This policy is used by the central bank to control the liquidity of money from an economy to bring the economy to a stable condition. This is done through management of interest rate and the money supply.

Answer 8

Expert Solution & Answer

Explanation of Solution

In the given case G, who can determine trends of financial market very efficiently, heads P. After the investment of G, in bond market of the U.S it is predicted that the interest rate will decrease in near future.
When there is a rise in unemployment, the inflation will fall and when there is a fall in unemployment, the inflation rate will rise. This is because the employment of people increases their ability to spend more which increases money supply in the economy which ultimately results in inflation. Therefore inflation and unemployment holds inverse relationship.
With a fall in inflation, it is predicted that the interest rate will fall to increase the liquid money. Therefore, according to the prediction, to increase the money supply in the economy the government will reduce the interest rate so that money demand can increase.

Conclusion:

Thus, to increase the money demand the interest rate will fall.