If inflation occurs when the money supply expands, what happens when the money supply contracts? (Think about this one) Prices will adjust to compensate for the altered size of the money supply. The price of everything is dramatically reduced to the point of nearly being 0. O Nothing happens. O Prices also rise.

If inflation occurs when the money supply expands, what happens when the money supply contracts? (Think about this one) Prices will adjust to compensate for the altered size of the money supply. The price of everything is dramatically reduced to the point of nearly being 0. O Nothing happens. O Prices also rise.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: Money Growth And Intlation

Section: Chapter Questions

Problem 1QR

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Similar questions

If inflation occurs when the money supply expands, what happens when the money supply contracts? (Think about this one) Prices will adjust to compensate for the altered size of the money supply. The price of everything is dramatically reduced to the point of nearly being 0. O Nothing happens. O Prices also rise.
In 2019, The Fed was liquidating their balance sheet (meaning they were selling off the bonds and securities purchased in The Great Recession 2007-2009). That means they are trying to do what in regards to the supply of money. O Increase O Decrease O Create a money stream to increase supply of money O Increase their Capital Gains
Suppose that when everyone wakes up tomorrow, they discover that thegovernment has given them an additional amount of money equal to the amountthey already had. Explain what effect this doubling of the money supply willlikely have on the following:a. The total amount spent on goods and servicesb. The quantity of goods and services purchased if prices are stickyc. The prices of goods and services if prices can adjust?
How does an increase in price level affect the money market? a. Money demand increases b. Money supply decreases c. Money demand decreases d. Money supply increases
When the money market is drawn with the value of money on the vertical axis, a decrease in the money supply leads people to O spend more so the value of a dollar falls. spend less so the value of a dollar falls. O spend more so the value of a dollar rises. spend less so the value of a dollar rises. W
The Fed raises the interest rate when it Oa. fears inflation. O b. wants to increase the quantity of money. O C. cannot change the quantity of money. O d. wants to encourage bank lending. O e. fears recession.
An increase in the money supply creates A. An excess supply of money that is eliminated by rising prices B. An excess supply of money that is eliminated by falling prices C. An excess demand for money that is eliminated by rising prices D. An excess demand for money that is eliminated by falling prices
Q: Suppose that when everyone wakes up tomorrow, they discover that the government has given them an additional amount of money equal to the amount they already had. Explain what effect this doubling of the money supply will likely have on the following:a. The total amount spent on goods and servicesb. The quantity of goods and services purchased if prices are stickyc. The prices of goods and services if prices can adjust
The Central Bank prints withdraws money from circulation and burns it. This will cause interest rates to: (Hint: draw a graph for the money market to figure out your answer.) O Stay the same Decrease Increase
When the Federal Reserve increases the money supply, people spend more because they now have more money. O True O False
11- 10- Nominal interest rate (percent per year) 94 8- 7- 6- 5- 4- 34 MD 2.8 2.9 3.0 3.1 Quantity of money (trillions of dollars) >>> Draw only the objects specified in the question. 3.2 Q 5 +
Suppose that the money supply increases by 20 percent. If there is no inflation, what does the quantity theory of money tell us must happen to real GDP? (Assume that the velocity of money is constant.) Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a It must increase by more than 20% It must increase by less than 20% C It stays the same d. It must increase by 20%