Question

1. Which of the following will definitely increase nominal money demand? a. decreasing interest rate and...

1. Which of the following will definitely increase nominal money demand?

a. decreasing interest rate and decreasing nominal GDP

b. increased nominal GDP and reduced inflation

c. rising interest rates and consumers decide to carry less cash than before

d. no answer is correct

e. increasing inflation and increasing real GDP

2. AN increase in the price level will...?

a. increase the nominal money supply

b. increase money demand

c. decrease money demand

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

1.

Ans is e). Increasing inflation and increasing real GDP

Explanation:

An increase in real GDP increases the volume of expenditure increases the real demand for money, An increase in the price level (inflation) increases the nominal demand for money.

2. AN increase in the price level will increase money demand.

Ans is b)

Explanation:

As the price level increases, people need more money to buy the same good so the demand for money increases.

Mathematically,

The equation for the demand for money is: Md = P * L(R,Y).

Md is positively related to P, so when P rises, money demand also rises

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Q - 1 Which of the following statements is correct about real GDP? a- Real GDP...
Q - 1 Which of the following statements is correct about real GDP? a- Real GDP is not affected by the amount of final goods and services that are newly produced. b- Real GDP is affected by the price levels used to calculate real GDP. c- Changes in real GDP is affected by the price levels used to calculate real GDP. d- Nominal GDP is not affected by the amount of final goods and services that are newly produced Q...
1.The Fed prefers to focus on the interest rate rather than growth in the money supply...
1.The Fed prefers to focus on the interest rate rather than growth in the money supply because a.it does not like to conduct open market operations. b.the money supply is too unpredictable. c.it makes inflation more predictable. d.money demand is too volatile. e.it is easier to fix the interest rate than maintain growth in the money supply. 2. Assume the Fed has complete control over the money supply. If the demand for money were greater than the supply of money,...
6. A persistent increase in the actual growth rate of real GDP in excess of the...
6. A persistent increase in the actual growth rate of real GDP in excess of the growth rate of potential real GDP likely will most result eventually in: (a) accelerating inflation; (b) a recession; (c) stagflation (rising inflation and falling real economic growth); (d) a looser monetary policy from the Federal Reserve. 7. For the most part, rising U.S. inflation is associated with: (a) a much stronger U.S. dollar in foreign exchange markets; (b) growth in aggregate demand at a...
If the demand for money decreases as a result of a(n) ________ in nominal GDP, the...
If the demand for money decreases as a result of a(n) ________ in nominal GDP, the interest rate will _______. Select one: a. increase; increase b. decrease; increase c. decrease; decrease d. increase; decrease
In the money market, the demand and supply of money determine the equilibrium nominal interest rate....
In the money market, the demand and supply of money determine the equilibrium nominal interest rate. mortgage interest rate. inflation rate.
1. Assume that you received a 3 percent increase in your normal wage. Over the year,...
1. Assume that you received a 3 percent increase in your normal wage. Over the year, inflation ran about 2.1 percent. Which of the following is true? a) Your real wage increased. b) Although your nominal wage rose, your real wage decreased c) Both your nominal and real wages decreased d) your nominal wage decreased 2. There are many measures of changes in price levels. which one of the following is the broadest measure of inflation? a) the GDP Chain...
According to classical macroeconomic theory, changes in the money supply affect nominal variables and real variables....
According to classical macroeconomic theory, changes in the money supply affect nominal variables and real variables. nominal variables, but not real variables. real variables, but not nominal variables. neither nominal nor real variables. The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected, production is more profitable and employment rises. production is more profitable and employment falls. production is less profitable and employment rises. production is less profitable and employment falls....
4. If money supply and money demand both increase by same amount, what would be the...
4. If money supply and money demand both increase by same amount, what would be the effect on real GDP? a. Real GDP would decrease. b. Real GDP would increase c. Real GDP would not change. d. None of the above.
1a. Which of the following statements is not true? An increase in the price level while...
1a. Which of the following statements is not true? An increase in the price level while real domestic income and the nominal money supply are constant An increase in real domestic income while the price level and the real money supply are constant. An increase in the price4 level while real domestic income and the nominal money supply are rising A decrease in the real money supply while the price3 level and real domestic income are constant b. Which of...
Why is the demand for money curve downward​ sloping? A.As interest rates​ increase, the demand for...
Why is the demand for money curve downward​ sloping? A.As interest rates​ increase, the demand for money increases. B.As interest rates​ decrease, the demand for money increases. C.As interest rates​ decrease, the demand for money decreases. D.As interest rates​ decrease, the supply of money decreases.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT