ECON 203 Lecture 15:

61 views2 pages

taupegoldfish601

2 Nov 2018

School

University of Calgary

Department

Economics

Course

ECON 203

Professor

Sonja Chen

For unlimited access to Class Notes, a Class+ subscription is required.

greeneagle277 and 10 others unlocked

ECON 203 Full Course Notes

Verified Note

21 documents

Document Summary

Inflation: increase in the overall level of price. Deflation: fall in the overall level of prices. Classical theory of inflation: the economy"s overall price level can be viewed in two ways: as the prices of a basket of goods and services, as a measure of the value of money. Money supply: the value of money is determined by the supply and demand for money. Money equilibrium: in the long run, overall level of prices adjusts to the level at which demand for money equals to supply. Quantity theory of money: theory asserting that: the quantity of money available determines the price level, the growth rate in the quantity of money available determines the inflation rate. Classical dichotomy and monetary neutrality: nominal variables: variables measure in monetary units, ex: prices, wages, and exchange rates, real variables: variables measured in physical units, ex: employment, real gdp, real consumption.

Related Questions

In the liquidity-preference framework, suppose that the Fed changes the money supply to keep the nominal interest rate unchanged whenever the demand for money shifts. Show what happens to the quantity of money and the nominal interest rate if the money-demand curve shifts to the right.

Suppose that the liquidity effect is small, people monitor changes in the money supply carefully, and prices and inflation expectations adjust rapidly. In this situation, describe the movement of the nominal interest rate when there is a permanent decline in the growth rate of the money supply.

Please answer all 3 thank you!!

46. Other things being equal, an increase in the supply of money

a. increases the price level.

b. reduces aggregate demand.

c. generate significant changes in relative prices.

d. reduces the amount of money balances.

47. As global financial markets become more intertwined, the Fed has

	a. more control over fiscal policy.
	b. less control over monetary policy.
	c. more control over monetary policy.
	d. less control over fiscal policy.

48. According to the quantity theory of money,

	a. the velocity of money is the least stable factor in the monetary analysis.
	b. a change in the money supply can lead only to a proportionate change in the price level.
	c. price level changes can best be explained by Keynesian analysis.
	d. the rate of inflation is not related to changes in the money supply.