Figure 34-3 (a) The Money Market (b) The Aggregate Demand Curve MS MD, MD. AD Y: Y, QUANTITY OF MONEY QUANTITY OF OUTPUT Refer to Figure 34-3. Which of the following sequences (numbered arrows) shows the logic of the interest-rate effect on the slope of aggregate demand? О а. 3, 4, 2, 1 О Б. 1,4, 3, 2 O c. 1, 2, 3, 4 O d. 3, 2, 1,4 INTEREST RATE PRICE LEVEL

Figure 34-3 (a) The Money Market (b) The Aggregate Demand Curve MS MD, MD. AD Y: Y, QUANTITY OF MONEY QUANTITY OF OUTPUT Refer to Figure 34-3. Which of the following sequences (numbered arrows) shows the logic of the interest-rate effect on the slope of aggregate demand? О а. 3, 4, 2, 1 О Б. 1,4, 3, 2 O c. 1, 2, 3, 4 O d. 3, 2, 1,4 INTEREST RATE PRICE LEVEL

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 8PA

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Question 12 Figure 35-3 INTEREST RATE (a) The Money Market (b) The Aggregate Demand Curve N5 QUANTITY OF MONEY Ö MO. PRICE LEVEL aa QUANTITY OF OUTPUT AD Refer to Figure 35-3. Which of the following sequences (numbered arrows) shows the logic of the interest-rate effect on the slope of aggregate demand? O 1,2,3,4 O 1,4,3,2 O 3, 4, 2, 1 O3, 2, 1, 4 1 pts
5:45 PM A 5 P NO fill 1.5 42 K ECF515-D-1-2021-1.docx SESSION A: CHOOSE THE BEST ANSWER 1. The IS curve represents A. the single level of output where the goods market is in equilibrium. B. the single level of output where financial markets are in equilibrium. C. the combinations of output and the interest rate where the money market is in equilibriu m D. the combinations of output and the interest rate where the goods market is in equilibriu m. 2. The IS curve will shift to the right when which of the following occurs? A. an increase in the money supply B. an increase in government spending C. a reduction in the interest rate D all of the above. 3. Which of the following occurs as the economy moves leftward along a given IS curve? A. an increase in the interest rate causes investment spending to decrease B. an increase in the interest rate causes money demand to increase C. an increase in the interest rate causes a reduction in the money supply D. a reduction in government spending…
2. Suppose that the money market can be depicted in the graph below. Interest rate (M/P)² (M³/P)⁰ (M³/P)1 H A K O B C O E L3 L1 L2 Quantity of Money LI is the original demand for money by the public and (M/P) is the real money supply. Assume tha the price level does not change. The original equilibrium is at point O. Suppose that the government lowered income taxes so that consumers had more disposable income. Briefly describe how you reached that conclusion. Identify the new equilibrium point and what happens to interest rates
5. Fiscal policy, the money market, and aggregate demand Suppose there is some hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the $0.50 they have left over. The following graph plots the economy's initial aggregate demand curve (AD)). Suppose now that the government increases its purchases by $2.5 billion. Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (AD) is parallel to AD. You can see the slope of AD, by selecting it on the following graph. ? PRICE LEVEL 116 114 112 110 108 106 104 102 100 100 AD₁ 102 106 108 110 OUTPUT (Billions of dollars) 104 112 114 116 AD₂ AD₂
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Consider an economy with a constant nominal money supply, a constant level of real outout Y= 400, and a constant real interest rate r 10%. Suppose that the income elasticity of money demand is 1.20 and the interest elasticity of money demand is-0.10. a. By what percentage does the equilibrium price level differ from its initial value if output increases to Y 480.00 (and rremaine at 10%)? %AP= (enter your result as a percentage rounded to two decimal places). b. By what percentage does the equilibrium price level differ from its initial value if the real interest increases to r-12.50% (and Y remaina at 400)? %AP (enter your result as a percentage rounded to two decimal placea). c. Suppose that the real interest rate inoreases to re 12.50%. By what percentage would real output have to increase for the equilibrium price level to remain at its initial value? %AY- T(enter your reault an a percentage rounded to two decimal places)
5. The slope and position of the long-run aggregate supply curve Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. O The inflation rate O The quantity of physical capital O The size of the labor force O The price level Suppose the economy produces real GDP of $30 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to piot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 112 108 104 100 10 20 30 40 50 60 70 80 OUTPUT (Billions of dollars) Suppose the government passes a law that reduces unemployment benefits in a way that causes unemployed workers to seek out new jobs more quickly. The policy will cause the natural rate of unemployment to fall , which will: Shift the long-run aggregate supply curve to the left Shift the long-run aggregate supply curve to the right Not affect…
Assume, in the 3rd quarter of 2018 in the U.S., the velocity of money was 3.08 and the M2 money supply was $1,050 million. The average prices in the economy was $1.44. Based on this, what was the real GDP of the U.S. in the 3rd quarter of 2018. O a. $2,750 million Ob. $1,250 million O C. $2,000 million O d. 52.250 million
10 - Which of the following depends on the demand for money, which we say just in case and for this purpose?A) IncomeB) to KeynesC) to the economyD) to interestE) Investment