ANSWERS TO HOMEWORK WEEK SIX EC141

ANSWERS TO HOMEWORK WEEK SIX EC141 - ANSWERS TO HOMEWORK...

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ANSWERS TO HOMEWORK WEEK SIX EC141 CHAPTER 11 1. (a) Disagree. A rise in Y increases the demand for money as more transactions take place, but the supply of money is unaffected. (b) Disagree. Ceteris paribus, a rise in P means that each transaction is more expensive and households and firms need to hold more money, not less. (c) Disagree. When the Fed buys bonds, it expands the money supply. The supply curve shifts to the right. When we experience a recession ( Y falls) the demand for money falls, shifting the demand curve to the left. Both tend to push interest rates lower. 6. CHAPTER 12 1. The bank hoped that the rate cut, brought about by an increase in the money supply, would increase investment spending (I). This would cause C + I + G > Y, inventories would fall and GDP (Y) would rise. Y increasing would set off a multiplier effect with C rising. 2. Answers will depend on the actual changes in residential and nonresidential investment spending which occurred between 2007 and 2009. 5.
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ANSWERS TO HOMEWORK WEEK SIX EC141 - ANSWERS TO HOMEWORK...

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