PLEASE HELP ASAP 5. If the Money Supply is $500, velocity is 5, and the Quantity
ID: 1143296 • Letter: P
Question
PLEASE HELP ASAP
5.
If the Money Supply is $500, velocity is 5, and the Quantity of Output is 1000 items, what will the price level be in long-run equilibrium?
Question 5 options:
The Price Level will be $25 on average.
The Price Level will be $25 for each and every item.
The inflation rate will be high at 25%.
d. There is no price level that will lead to equilibrium. This economy is doomed to suffer hyper-inflation.
6.
Choose the answer below that is consistent with the following data: Assume that velocity is 5, the quantity of output is 1,000 items, the price level is currently $10 and the Federal Reserve has created a total of $3,000.
This economy will suffer from Deflation due to an insufficiency of money for the size of the economy.
This economy will suffer from higher than normal interest rates due to an excess of money supply.
This economy will suffer from an increase in the price level at some point in the future.
The Fed is pursuing a contractionary monetary policy since the economy is in recession.
7.
The Federal Reserve wishes to stimulate the economy during a recession. It chooses to use Open Market Operations. Which of the following choices below is consistent with their desires?
Question 7 options:
The Fed sells securities on the open market. When the Fed collects the purchase price in cash the money supply is increased.
The Fed purchases securities on the open market. When the Fed pays for the securities it has purchased, deposits in the banking system rise and the money supply increases.
The Fed makes loans to banks so that the banks don't have to loan out as much money. The Fed prefers to reduce lending during a recession.
The Fed increases the Reserve Requirement during a recession to make sure that banks do no lend out as much during a recession.
11.
Monetary Policy under a Gold Standard:
Question 11 options:
a. tends to be expansionary since everyone wants gold in his bank account when it is legal.
b. tends to be highly inflationary since the government is now able to print as much paper money as it pleases.
c. is designed to prevent recessions by stimulating business activity when the economy falls into recession.
d, tends to be passive since the government cannot either increase or decrease the money supply in response to the business cycle.
The main benefit provided by a Gold Standard
Question 12 options:
is the ability it gives the government to change the money supply in order to "manage" the business cycle.
is that there is a limit placed on a government's ability to print money at will, thereby preventing inflation or hyperinflation.
is that if frees up a government's ability to conduct expansionary monetary policy when the economy is in recession.
is that it prevents a government from accumulating a national debt.
A)The Price Level will be $25 on average.
B)The Price Level will be $25 for each and every item.
C)The inflation rate will be high at 25%.
d. There is no price level that will lead to equilibrium. This economy is doomed to suffer hyper-inflation.
6.
Choose the answer below that is consistent with the following data: Assume that velocity is 5, the quantity of output is 1,000 items, the price level is currently $10 and the Federal Reserve has created a total of $3,000.
A)This economy will suffer from Deflation due to an insufficiency of money for the size of the economy.
B)This economy will suffer from higher than normal interest rates due to an excess of money supply.
C)This economy will suffer from an increase in the price level at some point in the future.
D)The Fed is pursuing a contractionary monetary policy since the economy is in recession.
7.
The Federal Reserve wishes to stimulate the economy during a recession. It chooses to use Open Market Operations. Which of the following choices below is consistent with their desires?
Question 7 options:
A)The Fed sells securities on the open market. When the Fed collects the purchase price in cash the money supply is increased.
B)The Fed purchases securities on the open market. When the Fed pays for the securities it has purchased, deposits in the banking system rise and the money supply increases.
C)The Fed makes loans to banks so that the banks don't have to loan out as much money. The Fed prefers to reduce lending during a recession.
D)The Fed increases the Reserve Requirement during a recession to make sure that banks do no lend out as much during a recession.
Explanation / Answer
Q.5. Option A)
The formula is , money supply*velocity = price level*output
500*5=P*1000
P= 2500/1000 = 2.5
Now for 100 items (2.5*1000)/100 = 25
Q.6 Option B)
Money supply = (1000*10)/5 = 2000
As the money supply required is less than money created it would lead to excess supply and hence higher interest rates
Q7. Option A
When Fed sells the securities at higher interest rate, people would buy the securities which increase the money supply
Q11. Option c.
A gold standard restricts the monetary authority from enacting policies which significantly alter the growth of the money supply which in turn limits the inflation rate of country.
Q12. Option 2. As it is used to control supply of money
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