M₁ M₁S Change in Money Supply: -Quantity changes -interest rate changes MD In the above image, central banks are bonds in order to fight a/an gap. Select one: O a. Selling; recessionary O b. Buying; recessionary
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- Which of the following about saving deposits a-under M2 supply, they they are bank accounts that you cannot white a check from directly. generally moneyl to be kept asided. you can easily withdraw money cash from these aacounts at an automatic teller machine or back d- included in M1 money supply these are the monies held in checking accounts. they are called demand deposits or chekable deposits because the bank must give the deposit holder his money on demand when a check is written or a debit card is used c- included in M1 money supply therefore, very lliquid these are coins and bills that vcirvulate in an economy that are NOT held by the US treasury Federal reserve bank, or in any bank vaults so the cash you havae in your wallet pocket right now d- under M2 money sypplly funds that you invest in where the deposits of many investors are pooled together and invested in a safe way such as short term goverment bods.Economics To increase the money supply, what could the Federal Reserve do? Choose one or more: OA. make an open market sale OB. decrease the discount rate O Cincrease income taxes OD. increase the discount rate O E. make an open market purchaseIf Canadian Tire issues its own "money" and it becomes generally accepted by people in paying for goods and services at other stores, then we would consider it to 84 be ca htt O A. legal money because Canadian Tire is a Canadian incorporated company. O B. a form of fiat money. O C. Mlegal money because the government has not issued it O D. a form of fiduciary money As hav
- Fiat money has Select one: a. value, because it can be redeemed for gold by the central bank. O b. little to no intrinsic value but is backed by the quantity of gold held by the central bank. C. a great intrinsic value that is independent of its use as money. O d. little to no intrinsic value and is authorized by the central bank or governmental body. Clear my choice FiniWhich of the following represents a short-run e_ect of a monetary contraction? Select one: O a. an increase in the interest rate O b. a reduction in the price level O c. all of the above O d. a reduction in outputConsider the model of supply and demand for central bank money. Assumethat there there are commercial banks. Suppose that people hold 20% of their moneyin currency and 80% of their money in deposits. The central bank sets the reserve-todeposit ratio at 10%. In the first period, the central bank increases the supply of moneyby $200, buying bonds through Open-Market Operations. Use this information to answerthe following questions:(a) For the second period (after the central bank has injected $200 in theeconomy), calculate: (i) the demand for currency, (ii) the amount of deposit held atthe commercial banks, (iii) the demand for reserves held at the central bank, and(iv) the demand for the high-powered money. How much is the additional moneysupply created at the end of the second period?2(b) How much is the additional money supply created at the end of the thirdperiod?(c) As time continues, additional money supply will be created. Calculatethe total increase in the money supply as a…
- 90 Figure 11-1 of Value of Maney MS1 MS2 lag Meney Dem and 1 C D Quantity of Man ey Refer to the Figure 11-1. What happens when the money supply curve shifts from MS, to MS,? Select one: a. The economy's ability to produce goods and services increases. b. The demand for goods and services decreases. c. The equilibrium value of money increases. d. The equilibrium price level increases. 2.1.Monetary equilibrium occurs when theQuestion options: A) supply and demand for all goods in the economy are equal at the current rate of interest. B) existing supply of money is willingly held by households and firms in the economy at the current rate of interest. C) growth in the money supply is zero. D) the money supply is growing at a constant rate. E) nominal rate of interest equals the real rate of interest. 2.The economy starts in long-run equilibrium. After an initial shock, and the subsequent adjustment process, the economy ends up at a point with a higher price level and the initial level of real GDP. Which of the following initial shocks would explain this?Question options: a) An increase in desired savings. b) An increase in government transfer payments. c) An appreciation of the Canadian dollar. d) An improvement in production technology. e) An increase in the cost of factor inputs. 3.The economy starts in long-run equilibrium. After an initial shock, and the subsequent…a. (i).Draw a graph showing equilibrium in the money market. Carefully label all curves andaxes and explainwhy the curves have the slopesthey do.(ii). Using the graph you prepared in a(i), illustrateand explain what happens when the Central Bankdecreases the money supply.(iii).When the Central Bankdecreases the money supply, theequilibrium level ofincome changes. Illustrate andexplain how
- Which of the following statements about money that is correct? O A. Credit cards and debit cards are examples of money. B. Deposits are money because they can be used to make payments. O C. Inflation brings a rising value of money. O D. Money is a completely stable store of value.The United States Federal Reserve is currently the money supply with the intention of keeping short-term interest rates O A. increasing, high B. increasing, low O C. decreasing, low O D. decreasing, high Reset Selection4. The U.S. Federal Reserve responded to the 2020 COVID-19 lockdowns by imple-menting an expansionary monetary policy, causing M2 money supply to rise from $15.33 trillion in December 2019 to $18.3 trillion in July 2020. Over the same period, real GDP fell by 5.1 percent. (b) Why would you not expect inflation to be immediate, following the monetary ex-pansion? 5. Inflation can cause increased wealth inequality through the Cantillion Effect. Essentially, this means that expansionary monetary policy benefits those who are initially given new money (usually those who are rich and well-connected), while the rest of the population suffers the effects of inflation. Using the quantity theory of money, explain why this is the case.