with explanation PLEASE!! According to liquidity preference theory, an increase
ID: 1180950 • Letter: W
Question
with explanation PLEASE!!
According to liquidity preference theory, an increase in the price level causes the interest rate to increase, which increases the quantity of goods and services demanded. increase, which decreases the quantity of goods and services demanded. decrease, which increases the quantity of goods and services demanded. decrease, which decreases the quantity of goods and services demanded. Which of the following shifts aggregate demand to the left? The price level rises. The price level falls. The money supply falls. None of the above is correct. If the interest rate is above the Fed's target, the Fed should buy bonds to increase the money supply. buy bonds to decrease the money supply. sell bonds to increase the money supply. sell bonds to decrease the money supply. If the MPC = 0.6, then the government purchases multiplier is about In a certain economy, when income is $250, consumer spending is $175. The value of the multiplier for this economy is 5. It follows that, when a person receives additional income of $40) total consumer spending is In the short run, an increase in government expenditures raises the price level, but not real GDP. raises real GDP, but not the price level. raises real GDP and the price level. raises neither real GDP nor the price level. Bonus Question: How many How much money did an adult (16 and over) American hold on average in 2009?Explanation / Answer
c) increase, which decreases the quantity of goods and services demanded
increase in the inteeres rate reduces the investment which is the reason for downward slopin curve
a) The price level rises
higher prices reduce the quantity of goods demanded.
a) buy bonds to increase the money supply
money supply will increase causing the interest rate to fall due to high demand of money
Govt. puchases multiplier = 1/1-MPC = 1/MPS = 1/1-0.6 = 1/0.4 = 2.5
1/MPS = 5
MPS = 1-MPC = 0.2
MPC = 0.8
175 = a + 0.8*250
a = 175-200 = -25
autonomus expenditure = -25
additional expenditure = 0.8*40 = 32
Total expenditure = 175 + 32 = 207
c) raises real GDP and the price level
the aggregate demand increases(rightward shift of the curve), causing an increase in the prices as the producers are willing to sell more only at an increased price(upward sloping supply curve). In the long run, the supply shifts to the right and increases the real GDP to match the increase in demand and the price moves back to the equilibrium.
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