Refer to the information in the figure Short-Run and Long-Run Effects of Monetar

Question

Refer to the information in the figure Short-Run and Long-Run Effects of Monetary Policy. If the economy is initially at E_2 and the central bank makes no change in its monetary policy: A. SRAS_2 will immediately shift to the right, increasing the existing inflationary gap. B. AD_2 will shift to the right, increasing the existing inflationary gap. C. AD_2 will shift to the left, closing the inflationary gap. D. SRAS_1 will eventually shift to the left, closing the existing inflationary gap but raising the aggregate price level. If actual output is equal to potential output and the Fed decreases the money supply, in the short run the likely result will be a(n) in investment and a(n) in consumption. A. increase; increase B. decrease; decrease c. increase; decrease D. decrease; increase Monetary policy that increases the demand for goods and services is known as monetary policy. A. contractionary B. inflationary C. quantitative D. expansionary Expansionary monetary policy: A. decreases the money supply, increases interest rates, and decreases consumption and investment. B. increases the money supply, decreases interest rates, and increases consumption and investment. C. increases the money supply, interest rates, consumption, and investment.

Explanation / Answer

43. b

If Fed decreases the money supply, then in short run investment and consumption will be decreases.

44 d.

Monetary policy that increases the demand for goods and services is known as Expansionary monetary policy.

45. b

Expansionary monetary policy reduces interest rates or increasing the money supply to boost economic activity.

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.