Suppose an increase in aggregate demand raises the price level. What would be the effect on the total money demand curve?
What will be an ideal response?
The rise in price level means that nominal GDP has increased. Since transactions demand for money depends on the level of nominal GDP, the increase in GDP will result in an outward shift of the transactions demand for money curve. This in turn causes the total money demand curve to shift outward.
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Rent seeking is one reason why countries choose to
A) restrict trade. B) export and import the same goods. C) work for freer trade. D) follow the theory of comparative advantage.
The velocity of money is defined as: a. the time it takes the average worker to get to the bank with his/her paycheck
b. the time it takes banks to clear checks. c. the average number of times per year each dollar is used to purchase final goods and services. d. the ratio of money supply to the average price level in an economy. e. the average number of times per year each dollar is spent for goods, payrolls, Social Security payments, etc.
A major challenge faced by Western Union in wiring money between the United States and Mexico is that ________.
A) it can only transfer funds in one direction B) it is facing competition from some commercial banks C) Mexican citizens do not like to use its services because it does not have strong ties with Mexican banks D) Mexican citizens trust the banks but do not trust Western Union due to its heritage a
The openness of the economy and flexible exchange rates
A. reduce the effectiveness of both expansionary and contractionary monetary policies. B. increase the effectiveness of a contractionary monetary policy, but reduce the effectiveness of an expansionary monetary policy. C. increase the effectiveness of an expansionary monetary policy, but reduce the effectiveness of a contractionary monetary policy. D. increase the effectiveness of both expansionary and contractionary monetary policies.