Indicate how changes in monetary policy are transmitted to the goods and services market? Discuss for the case of an expansion in the money supply
When the money supply is expanded, aggregate demand will rise for several reasons. First, the larger money supply will increase the supply of loanable funds, causing real interest rates to fall. The lower real interest rates will cause businesses to expand their investment and consumers to purchase more durable goods. Second, the lower U.S. interest rate will lead to a depreciation in the exchange rate value of the dollar, as investors move their money to foreign countries for a higher rate of return. This will increase U.S. net exports. Third, the lower interest rates will tend to increase the value and prices of assets, such as homes. This will increase consumer wealth and stimulate consumption.
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Market basket B is to the northwest of basket A but lies on the same indifference curve for a consumer. Market basket C also lies to the northwest of A but is above the indifference curve. This consumer
a. prefers C to A. b. is also indifferent between A and C. c. prefers B to A. d. prefers C to B.
The total interest that a borrower has to pay on a loan is equal to the:
A) principal plus the rate of interest. B) principal divided by the rate of interest. C) principal minus the rate of interest. D) principal times the rate of interest.
An increase in the price level ________ the aggregate quantity supplied and ________ the aggregate quantity demanded
A) increases; decreases B) does not change; decreases C) decreases; increases D) decreases; decreases E) increases; increases
The socially optimal amount of pollution abatement may be less than 100 percent
a. True b. False