Aggregate Supply - TUT - Questions A and B
7 important questions on Aggregate Supply - TUT - Questions A and B
With which statement would the "No" camp disagree?
- Money helps markets adjust to equilibrium
- Money can block the transmission mechanism between interest rates and aggregate demand
- Money gives people a way not to spend
- None of the above
The "Yes" and "No" camps agree that:
- Business cycles happen often
- Money helps markets quickly adjust to equilibrium
- Markets quickly adjust back to the equilibrium of potential GDP and full employment
- Money affects prices and inflation
Fiat Money:
- Is a tradeable product with alternative uses serving as money
- Includes balances in bank accounts that can be withdrawn on demand
- Is paper money that can be converted into gold on demand
- Includes government-issued paper bills
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Through the domestic monetary transmission mechanism, decreases in money demand cause:
- Inflation and increased real GDP
- Deflation and decreased real GDP
- Deflation and increased real GDP
- Inflation and decreased real GDP
How much does money matter for business cycles? According to the 'No, markets left alone fail to adjust' camp.
- Money has no effect
- Money helps loanable funds adjust quickly to equilibrium
- Money adds new internal shocks
- Money adds new external supply shocks
Interest Rates:
- For short-term bonds are fixed
- For short-term bonds tend to rise when interest rates for long-term bonds fail
- Are usually lower on long-term bonds than on short-term bonds
- Are usually lower on short-term bonds than on long-term bonds.
If you deposit $5,000 cash, and your bank chooses to keep 25% of deposits as revenues, it can create:
- $5,000 in new money
- $3,750 in new money
- $2,500 in new money
- $1,250 in new money
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