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1. What impact will an unanticipated increase in the money supply have on the real interest rate, real output, and employment in the short run? How will expansionary monetary policy affect these factors in the long run? Explain. 2. How rapidly has the money supply (M1) grown during the past twelve months? State the rate of growth and the most recent release, use the seasonally adjusted figures. Calculate the rate of growth across the year. Given the state of the economy, should monetary authorities increase or decrease the growth rate of money? Explain why.

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Related questions

Problem Set 5

Complete all questions listed below. Clearly label your answers.

1. What impact will an unanticipated increase in the money supply have on the real interest rate, real output, and employment in the short run? How will expansionary monetary policy affect these factors in the long run? Explain.

2. How rapidly has the money supply (M1) grown during the past twelve months? State the rate of growth (use http://www.federalreserve.gov/releases/h6/) and the most recent release, use the seasonally adjusted figures. Calculate the rate of growth across the year by taking the (new amount of M1- old amount of M1)/old amount of M1). Given the state of the economy, should monetary authorities increase or decrease the growth rate of money? Explain why.

3. Is stability in the general level of prices through time important? Why or why not? Should price stability be the goal of monetary policy? Explain your responses.

4. Compare and contrast the impact of an unexpected shift to a more expansionary monetary policy under rational and adaptive expectations. Are the implications of the two theories different in the short run? Are the long-run implications different? Explain.

what impact will an unanticipated increase in the money supply have in the real interest rate, real output, and employment in the short run? How will expansionary monetary policy effect these factors in the long run? explain.

  1. Assume that the Federal Reserve (%u201Cthe Fed%u201D) unexpectedly shifts to restrictive monetary policy. Why would the Fed make such a policy shift? Explain how the Federal Reserve will implement this restrictive monetary and how the effects of this policy will ripple through the economy to impact real output both in the short run(SRAS) and in the long run (LRAS).

  1. Using the Federal Reserve%u2019s report (see link below) on Money Stock Measures for June 7, 2012 determine the growth rate of the Seasonally Adjusted M1 Money Supply between January 2011 and January 2012. State the rate of growth as a percent of January 2011 Seasonally Adjusted M1 Money Supply. Given the state of the economy, should monetary authorities increase or decrease the growth rate of money? Explain why. Link to report: http://www.federalreserve.gov/releases/h6/

  1. Is stability in the general level of prices through time important? Why or why not? Should price stability be the goal of monetary policy? Explain your responses.

  1. What is the Quantity Theory of Money? What are its implications? Does the theory have any shortcomings, if so what are they? Have the predictions of the Quantity of Theory of Money proven accurate?

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