Question

2. If the price level rises how does this affect the nominal money supply.How does this affect real money supply.so question is Fully explain your reasoning. What will shift the real money demand curve and why? (5 pts.)

Answer #1

QUESTION 6
If real income rises 5 percent, price rises by 2 percent,
nominal money demand rises by 4 percent, what is the income
elasticity of real money demand (assuming nominal interest rate
does not change)?
less than or equal to 0.2
greater than 0.2 and less than or equal to 0.3
greater than 0.3 and less than or equal to 0.4
greater than 0.4 and less than or equal to 0.5
greater than 0.5
0.3 points
QUESTION 7...

Explain how permanent shifts in national real money demand
functions affect real and nominal exchange rates in the long
run.

Explain how permanent shifts in national real money demand
functions affect real and nominal exchange rates in the long
run.

Assume the money supply is $500, the velocity of money is 8, and
the price level is $2. Using the quantity theory of money:
a. Determine the level of real output. $.
b. Determine the level of nominal output. $.
c. Assuming velocity remains constant, what will happen if the
money supply rises 20 percent?
Nominal output would be
$
, and real output would be
$
.

How does the interest sensitivity of demand for real balances of
money affect the slope of the LM curve

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....

49. The demand for real money rises if
a. the nominal interest rate falls.
b. the real output falls.
c. the nominal interest rate rises.
d. the real interest rate rises.
50. If the nominal interest rate is R = 0:10; or 10%; and the
ináation rate is 0:03 or 3%; the implied real rate of interest
is
a. 0:10 or 10%
b. 0:07 or 7%
c. 0:05 or 5%
d. 0:03 or 3%
I need help with both questions...

Using aggregate supply and demand analysis, discuss how the
following will affect the aggregate level of output and the price
level in the economy. Use a SRAS curve. You need to determine
whether the AD or SRAS curve will shift, in which direction it will
shift, and how this will affect aggregate output and the price
level.
a. A hurricane that destroys half the supply of goods produced
in Florida.
b. An increase in the money supply.

An increase in the price level causes
A.
the money demand curve to shift to the right.
B.
the money demand curve to shift to the left.
C.
a movement up along the money demand curve.
D.
a movement down along the money demand curve.

Assume the money supply is $600, the velocity of money is 6, and
the price level is $3. Using the quantity theory of money: a.
Determine the level of real output. b. Determine the level of
nominal output. c. Assuming velocity remains constant, what will
happen if the money supply rises 20 percent? Nominal output would
be $?? and real output would be $?? d. If the government
established price controls and also raised the money supply 5
percent, what...

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