Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 36.4, Problem 4QQ
To determine
Increase in money supply.
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Suppose the government increases expenditures while holding taxes the same. This will increase deficits or decrease surpluses Assume the increase in government expenditures, from above, occurs As a result of the increase in government expenditures, the O A money supply curve will shift right. OB. money demand curve will shift loft. C. money demand curve will shift right. D. The money supply curve will shift left.
Q.1.6 Which of the following will cause the demand curve for money to shift to theright?(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.
Assume that a government cuts its expenditure and therefore runs a public-sector surplus.
(a) What will this mean for the equilibrium national income?(b) What will this mean for the demand for money and to interest rates?(c) Under what circumstances will it lead to a (i) decrease in money supply, and (ii) no change in money supply?(d) What effect will each of the two scenarios in (c) will have on the rate of interest rate compared with its original level?
Chapter 36 Solutions
Economics (Irwin Economics)
Ch. 36.1 - Prob. 1QQCh. 36.1 - Prob. 2QQCh. 36.1 - Prob. 3QQCh. 36.1 - Prob. 4QQCh. 36.4 - Prob. 1QQCh. 36.4 - Prob. 2QQCh. 36.4 - Prob. 3QQCh. 36.4 - Prob. 4QQCh. 36.5 - Prob. 1QQCh. 36.5 - Prob. 2QQ
Ch. 36.5 - Prob. 3QQCh. 36.5 - Prob. 4QQCh. 36 - Prob. 1DQCh. 36 - Prob. 2DQCh. 36 - Prob. 3DQCh. 36 - Prob. 4DQCh. 36 - Prob. 5DQCh. 36 - Prob. 6DQCh. 36 - Prob. 7DQCh. 36 - Prob. 8DQCh. 36 - Prob. 1RQCh. 36 - Prob. 2RQCh. 36 - Prob. 3RQCh. 36 - Prob. 4RQCh. 36 - Prob. 5RQCh. 36 - Prob. 6RQCh. 36 - Prob. 7RQCh. 36 - Prob. 8RQCh. 36 - Prob. 9RQCh. 36 - Prob. 1PCh. 36 - Prob. 2PCh. 36 - Prob. 3PCh. 36 - Prob. 4PCh. 36 - Prob. 5PCh. 36 - Prob. 6PCh. 36 - Prob. 7P
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- 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?arrow_forwardIf the monetary base (B) is $1,110 billion and the money supply is $8,800 billion Group of answer choices A) The money multiplier mush be 0.125. B) Nominal GDP must be $7,700. C) The money multiplier mush be 8. D) The money multiplier mush be 7.7. E) The money multiplier mush be 7.arrow_forward6. a) If US money supply in the beginning of the year is $1148 billion. Suppose the FedBank has decided to raise the reserve ration from 10 percent to 11 percent. How itwould affect the money supply? b) If tax multiplier is -2, what is the government spending multiplier? c) In order to increase equilibrium income, either the government can increasegovernment spending or may go for tax cut? What would you suggest and why?arrow_forward
- Explanation it correctly Q)Assume that some people who receive bank loans do not deposit the full amount of the loan into a bank. This will cause the money multiplier to be the bank deposits multiplier. A) smaller than B) greater than C) neither greater than or smaller than D) the same asarrow_forwardinstructions: tackle question b only A. Given that in an economy, Given that in an economy, C = 102+0.7Y, I=150-100r, MS =300, Mt = 0.4Y, and Mz=125-200r where, Y= income, C= consumption, I= investment, MS= money supply, Mt= transactional-precautionary money demand, Mz= speculative money demand and r= interest rate. Calculate;1. The equilibrium level of income and interest rate in this economy.2. The level of C, I, Mt, and Mz when the economy is in equilibrium. B. Now, assuming the economy is open with government (G) participation and external trade which is summarized as follows; export(X)= 100-0.10Y, import(M)=50, G=100, Taxes(T)= 100 and C, I, MS, Mt, and Mz the same as defined in (a) above. Calculate; i. The equilibrium income and interest rate in this new economy. ii. The level of C, I, Mt, and Mz when the economy is in equilibrium iii. What exchange rate policy should government implement in (iii) to enhance income and why?arrow_forward4. According to Monetary neutrality and classical macroeconomics, the increase in money supply ________________________ (a) Increase the GDP deflator (b) decrease the GDP deflator (c) Increase real GDP (d) decrease real GDP (e) both GDP deflator and real GDP do not changearrow_forward
- please dont use chatGPT otherwise give downvote Exhibit: Changes in the Money Supply The increase in money supply leads to a (n) Group of answer choices decrease in investment, a decrease in real GDP, and a shift to the left in the money demand curve. increase in investment, a decrease in real GDP,and a shift to the right in the money demand curve. increase in investment, an increase in real GDP,and a shift to the left in the money demand curve. increase in investment, an increase in real GDP,and a shift to the right in the money demand curve.arrow_forwardExhibit: Changes in the Money Supply The increase in money supply leads to a (n) Group of answer choices decrease in investment, a decrease in real GDP, and a shift to the left in the money demand curve. increase in investment, a decrease in real GDP,and a shift to the right in the money demand curve. increase in investment, an increase in real GDP,and a shift to the left in the money demand curve. increase in investment, an increase in real GDP,and a shift to the right in the money demand curve.arrow_forwardGive typing answer with explanation and conclusion If the monetary base increases by $1 million and the quantity of money increases by $2.5 million, then the money multiplier is _arrow_forward
- Suppose following a 25% increase in the monetary base, the money supply rises by 80%. The simple money multiplier is _______.arrow_forwarda. If money supply is increased by 10, what will be the new interest rate? Round your answers to one decimal place. Pabst: 5 Numeric ResponseEdit Unavailable. 5 correct.% Kokanee: 6 Numeric ResponseEdit Unavailable. 6 correct.% b. What will be the increase in investment spending as a result of this new interest rate? Pabst: 60 Numeric ResponseEdit Unavailable. 60 incorrect. Kokanee: 50 Numeric ResponseEdit Unavailable. 50 incorrect. c. If the multiplier is 3 in each economy, what will be the increase in GDP? Pabst: Kokanee: d. In which economy would monetary policy be more effective in closing a recessionary gap? Pabst Can you please help with B, Carrow_forwardSuppose that the reserve requirement for checking deposits is 16 percent and that banks do not hold any excess reserves. If the Fed sells $2 million of government bonds, the economy's reserves (either increase or decrease) by $______million, and the money supply will (increase or decrease) by $______million. Now suppose the Fed lowers the reserve requirement to 8 percent, but banks choose to hold another 8 percent of deposits as excess reserves. True or False: The money multiplier will increase. False True or False: As a result, the overall change in the money supply will increase. Truearrow_forward
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