Contrast the Keynesian and Monetarist views on how a change in the money supply impacts the economy.
What will be an ideal response?
According to Keynesian economists, an increase in the money supply will reduce interest rates, stimulate borrowing and spending, shifting the aggregate demand curve to the right, which increases real GDP (if we are not already at full employment). The impact of this expansionary monetary policy on inflation depends on which range we are in along the aggregate supply curve.
Monetarists, using the quantity theory of money, believe a change in the money supply has a much more direct and predictable impact on the economy. The monetarists do not see a change in the money impacting the economy by first effecting interest rates.
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Which of the following is NOT one of the major problems with expanding the EU?
A) Expansion has become a more difficult task because of the unwillingness of the eastern and central European countries to change. B) The programs that target EU expenditures could be stretched thin by the addition of countries with much lower incomes. C) The governance structure of the EU had to be changed to avoid becoming unwieldy and ineffective. D) The EU may be faced with an unstable eastern border with huge worker migratory flows if the transition economies fail. E) Most central and eastern European countries have large agricultural sectors and extending subsidies to these countries would entail an enormous flow of funds given the Common Agricultural Policy.
Which of the following statements is FALSE?
A) If there is an increase in the demand for a product, consumers want to buy more of the product at each and every possible price. B) A decrease in demand shifts the demand curve leftward toward the origin, while a decrease in quantity demanded involves a movement upward along a particular demand curve. C) If the price of a good rises, quantity demanded of the good decreases and the demand curve shifts toward the origin as long as supply is static. D) A change in the demand for a product is caused by factors other than changes in the product's price.
The marginal propensity to consume:
A. is closely linked to the multiplier effect of government spending. B. is the amount by which consumption increases when after-tax income increases by $1. C. is a value between 0 and 1. D. All of these are true.
Which of the following was the result of Fannie Mae and Freddie Mac being both privately-owned and government-sponsored enterprises?
a. Their government sponsorship increased their cost of acquiring loanable funds. b. They were unable to earn profits and pay dividends to their shareholders. c. Congressional regulations exerted little or no impact on their business operations. d. Their activities were more susceptible to political influence and favoritism.