Question

Briefly describe the effects of an increase in the money supply in a. the classical model....

Briefly describe the effects of an increase in the money supply in

a. the classical model.

b. the Keynesian model.

c. the monetarist model.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Classical model

  • When there will increase in money supply in classical model there will no change in income level , employment level and real wage rate but there will be change in monetary variable which will change proportionally .Therefore increase in money supply in classical model will have neutral effect

Keynesian model

  • Increase in money supply will have no effect in Keynesian model. That is even when the increase in money supply will lead to fall in interest rates but there will not be any change in the aggregate Demand in the economy

Monetarist model

  • When there will be increase in money supply then according to monetarist model there will increase in economic activity and economic growth .Increase in money supply will lead to increase in price level will be more than the production of goods and services when the economy is close to full employment level
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
1. Briefly explain the historical events that led to the fall of the Classical model. Explain...
1. Briefly explain the historical events that led to the fall of the Classical model. Explain the economic implications of these events in terms of why they caused the model to fall into disfavor. 2. Keynes dramatically rethought how the demand for money was structured. What was the key difference between his formulation and that of the Classical model? 3. How did the modern Monetarist reformulation of the Quantity Theory? Combine the Cambridge version of the Quantity Theory of money...
14. An increase in the money supply will increase real GDP growth in the long run...
14. An increase in the money supply will increase real GDP growth in the long run in A) the Real Business Cycle model. B) the New Keynesian model. C) Neither the Real Business Cycle model nor the New Keynesian model. D) Both the Real Business Cycle model and the New Keynesian model. 15. Suppose The Fed lowers the reserve ratio requirement for banks to increase the money supply in an economy. Which of the following best describes why this may...
Describe the role of money in the economy according to the Classical model.
Describe the role of money in the economy according to the Classical model.
In the aggregate demand and supply model, an increase in the quantity of money will directly...
In the aggregate demand and supply model, an increase in the quantity of money will directly shift: a. The aggregate demand curve right. b. The aggregate demand curve left. c. The aggregate supply curve right. d. The aggregate supply curve left.
Using the money supply (M1) model developed in class, explain the likely effects on the money...
Using the money supply (M1) model developed in class, explain the likely effects on the money supply of the following. Be sure your answer indicates what changes in the model. a. the U.S. Treasury spends some of its account at the Fed b. the Fed does an open market sale of bonds c. banks lower the fees they had charged depositors each time a depositor uses a debit or credit card to buy goods or services d. the Fed increases...
Explain very briefly if the following statements are true or false. Mathematical or graphic treatment will...
Explain very briefly if the following statements are true or false. Mathematical or graphic treatment will be appreciated wherever possible or necessary. While in the classical model with flexible wages and prices both output and employment are determined in the goods market by the demand for and supply of goods, in Keynes’ model with fixed money wages they are not. In Keynes’ model the important role of the interest rate is to bring the real demand in line with supply...
1. For any given increase in reserves, which of the following reduces the money supply creation...
1. For any given increase in reserves, which of the following reduces the money supply creation process?       a. high currency preference among the banking public        b. banks holding large amounts of excess reserves        c. high interest elasticity of money demand        d. both a and b 2. The classical approach to dealing with the Great Depression would have been?        a. do nothing, wait for the long run        b. active fiscal...
Two versions (Classical & Keynesian) of the money demand function were discussed in class. Succinctly describe...
Two versions (Classical & Keynesian) of the money demand function were discussed in class. Succinctly describe the underlying theory and differences between the two versions.
If we increase government spending on education and infrastructure how will this impact AD/AS in the...
If we increase government spending on education and infrastructure how will this impact AD/AS in the a) Classical Model b) Keynesian Model c) Supply-side Model
Graph an increase in the money supply and the most likely effect this will have on...
Graph an increase in the money supply and the most likely effect this will have on the AD/AS model. Explain briefly the link between the two graphs .
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT