Figure Short Run Determination of the Interest Rate If the money supply is at

Figure short run determination of the interest rate

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67.(Figure: Short-Run Determination of the Interest Rate) If the money supply is at MSand the Fed conducts expansionary monetary policy, in the short run the interest rate drops to r2. In the long run:1A)prices will decrease and decrease the demand for money.B)prices will decrease and increase the demand for money.C)prices will increase and decrease the demand for money.D)prices will increase and increase the demand for money.68.(Figure: Short-Run Determination of the Interest Rate) If the money supply is at MSand the Fed conducts expansionary monetary policy, in the short run the interest rate drops to r2. In the long run:1...Page 17
69.(Figure: Short-Run Determination of the Interest Rate) If the money supply is at MSand the central bank sells bonds, then in the short run the interest rate will:2...70.(Figure: Short-Run Determination of the Interest Rate) If the money supply is at MSand the Fed conducts contractionary monetary policy, in the short run the interest rate increases to r1. In the long run:271.(Figure: Short-Run Determination of the Interest Rate) If the money supply is MS2and the Fed conducts contractionary monetary policy, in the short run the interest rate increases to r1. In the long run:at A)the demand for money will increase, and the interest rate will increase to r1B)the demand for money will increase, but the interest rate will remain at r2C)the demand for money will decrease, and the interest rate will decrease to r2D)the demand for money will decrease, but the interest rate will remain at r1....72.If the Federal Reserve uses expansionary monetary policy:73.Suppose the economy is in long-run equilibrium at full employment levels of real GDP. In the long run, if the money supply increases, we would expect _____ in the price level and _____ in real GDP.Page 18

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