42. According to economists, money is NOT A) a medium of exchange B) a store of

Question

42. According to economists, money is NOT A) a medium of exchange B) a store of value C) a unit of account D) capital the level of According to your textbook, through what channel does monetary policy influence real GDP and the price level? A) If the 43. money supply increases, interest rates fall, causing Investment to rise, which causes Aggregate Demand to rise, resulting in an increase Real GDP and an increase in the Price Level. B) If the money supply increases, interest rates fall, causing Investment to fall, which causes Aggregate Demand to fall, resulting in a decrease Real GDP and an increase in the Price Level. Real GDP and a decrease in the Price Level. If the money supply increases, Aggregate Supply will rise, causing interest rates to CI the money supply increases, Aggregate Supply will rise, resulting in an increase D) fall, which causes an increase in Aggregate Demand, resulting in an increase in Real GDP and a decrease in the Price Level. Use the following to answer question 44: Figure: Money Market I Interest rate, r TH Equilibrium Equilibrium interest rate MH ML Quantity of money

Explanation / Answer

Ans)

42.
D) Capital
According to the economists, money is anything which can be used as medium of exchange, a store of value, standard of deferred payment and a unit of account.
43.
A)if the money supply increases, the interest rate falls, causing investment to rise, which causes Aggregate demand to rise, resulting in an increase real GDP and an increase in the price level.
An increase in the money supply leads to a fall in the average interest rates, because of this borrowing becomes cheaper, investment increases, because of which aggregate demand increase(AD=C+I+G+NX) and shifts to the right thereby increasing the output and increasing the price level.
44.
A) move towards point H
If the central banks sell bonds then it will be paid in money and hence money supply will be reduced, because of this reduction the money supply will shift to the left thereby reducing the equilibrium level of money.
45.
D) The money supply would increase by more than$100 million.
This is because of the presence of the multiplier.A simple purchase of $100 million multiplied by the multiplier would increase the level of money by more than $100 million.
46.
A) 0.5 Euro
if 1 euro=2 dollars
then 1 Dollar=1/2 Euro
1 Dollar=0.5 euro

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