Which of the following would be classed as an expansionary monetary policy? Ο Α. A decrease in the quantity of money. В. A decrease in interest rates. С. An increase in government taxation. O D. An increase in government expenditure. ОЕ. An increase in VAT.
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- Which best describes why the multiplier exists? When people spend money, that money ends up in the pockets or bank accounts of other people or organizations, who then use that money in some way. O The multiplier exists because money spent today is always more valuable than money spent in the future, due to inflation and interest rates. When people see the government spending more money, they realize that the government thinks that prices are low; thus, they believe it is a good time to buy things. When people see other people spending money, they know that the economy is about to improve, leading them to spend more money.Which point/s represent an equilibrium in the goods market? a. A only O b. A and D O c. A and C O d. All of the above Which point/s represent an equilibrium in the money market? O a. A and D O b. All of the above O c. A only O d. A and C A decrease in autonomous spending will decrease the equilibrium interest rate. O a. False; keep O b. False; increase O c. False; not affect because autonomous spending is not related to interest rate O d. TrueWhich of the following are examples of monetary policy that decrease aggregate demand? O A. a decrease in the quantity of money and an increase in interest rates O B. a decrease in taxes and a decrease in interest rates O C. an increase in transfer payments and an increase in interest rates O D. an increase in the quantity of money and a decrease in interest rates 身
- The diagrams show the monetary equilibrium and the demand for investment. The economy begins with money supply Ms, money demand Mp, and investment demand ID. The interest rate is in and desired investment is lo. Interest Rate % O A. interest rates will fall and the quantity of desired investment expenditure will fall. O B. interest rates will rise and the quantity of desired investr expenditure will fall. C. interest rates will rise and the quantity of desired investment expenditure will rise. O D. interest rates will fall and the quantity of desired investment expenditure will rise. 00 .O Ms a. Beginning at the initial equilibrium, suppose the Bank of Canada increases the money supply. In this case, Quantity of Money Mp Interest Rate % Desired Investment Q1. 2. 3. Which of the following statements is true? O a. The goods and money markets can never be in equilibrium. O b. The goods and money markets are in equilibrium at the points where the money market is in equilibrium. O c. The goods and money markets are in equilibrium at their point of intersection only. O d. The goods and money markets are in equilibrium at the points where the goods market is in equilibrium. Which of the following describes the steepest investment schedule? O a. I=450-8(3) b. 1-450-2(3) O c. 1=450-9(3) O d. 1=450-5(3) Which of the following will shift the investment schedule to the left? O a. Decrease in autonomous investment spending O b. Decrease in autonomous spending O c. Increase in coefficient b d. Decrease in coefficient kPeter thinks that low interest rates hurt the economy. Mary disagrees and says that low interest rates help the economy. All othe things being equal, who is right? O a. None of the alternatives is correct. b. Mary, because low interest rates encourage investment. O c. Mary, because she refers to the monetary flow of the economy, which dominates the real flow. O d. Peter, because low interest rates make people hoard and store money. O e. Peter, because he refers to the real flow of the economy, which determines the monetary flow. Clear my choice
- Monetary policy becomes more effective as Select one: O a. the income tax increases O b. the interest sensitivity of investment increases O c. the marginal propensity to save increases O d. the interest sensitivity of money demand increasesAn increase in the value of the simple multiplier can be caused by... O a. An increase in the net tax rate. O b. A decrease in the net tax rate. O c. An increase in the marginal propensity to save. O d. A decrease in the marginal propensity to consume. O e. An increase in the marginal propensity to import. Clear my choiceConsider the impact of a cut in the interest rate set by the central bank (the "policy rate"), which causes banks to lower interest rates for both borrowers and lenders. Select one or more: U a. Borrowers like Julia will definitely be better off O b. Borrowers like Julia will definitely increase their current consumption O c. If Marco is a saver (not an investor) he will definitely be worse off O d. If Marco is a saver he will definitely decrease his consumption
- es Suppose a firm is currently producing 900 computers per week and charging a price of $1,200 per computer. a. Demonstrate how the firm will respond to a negative demand shock. Assume prices are flexible. Instructions: Use the tool provided, 'S Flexible Prices', to draw the supply curve when prices are flexible. Then use the tool provided, 'D Negative Shock', to illustrate the shift in the aggregate demand curve when there is a negative demand shock. Computer Market Price $1,200 900 Computers per week Demand Tools S Flexible Pric D Negative Sh OAll of the following, except one, will cause an increase in aggregate demand. Which is the exception? a. A decrease in the exchange rate. O b. An increase in government spending. O c. A decrease in the interest rates. O d. A decrease in the price level.1. Which of the following will shift the investment schedule to the left? O a. Decrease in autonomous investment spending O b. Decrease in autonomous spending O c. Increase in coefficient b O d. Decrease in coefficient k 2. 3. Which of the following will not affect the money market? O a. Money supply O b. Price of one good O c. Expansionary monetary policy O d. Contractionary monetary policy Government spending does not affect the investment schedule. O a. True O b. False; shifts investment schedule to the right O c. False; makes investment schedule steeper or flatter O d. False; shifts investment schedule to the left