This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Expansionary monetary policy will have what effect on the components of aggregate demand? A) ... (Read 106 times)

V@ndy87

  • Hero Member
  • *****
  • Posts: 571
on: Jun 29, 2018
Expansionary monetary policy will have what effect on the components of aggregate demand?
 
  A) Consumption, investment, and net exports will rise.
  B) Consumption will rise, but investment and net exports will fall.
  C) Consumption and investment will rise, but net exports will fall.
  D) Consumption will fall, but investment and net exports will rise.

Question 2

How does an increase in government purchases financed by an increase in the deficit affect exchange rates? Support your answer with graphs of the loanable funds market and the foreign exchange market.
 
  What will be an ideal response?


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

14vl19

  • Sr. Member
  • ****
  • Posts: 310
Reply #1 on: Jun 29, 2018
Answer to Question 1

A

Answer to Question 2

An increase in government purchases financed by an increase in the deficit will reduce the supply of loanable funds, thereby increasing the interest rate. The increase in the interest rate will increase the demand for dollars (as capital inflows increase) and reduce the supply of dollars (as capital outflows decrease). Both the increase in the demand for dollars and the decrease in the supply of dollars will increase the equilibrium exchange rate, as shown below.


V@ndy87

  • Member
  • Posts: 571
Reply 2 on: Jun 29, 2018
Great answer, keep it coming :)

ASDFGJLO

  • Member
  • Posts: 335
Reply 3 on: Yesterday
Excellent

« previous next »
 

Did you know?

HIV testing reach is still limited. An estimated 40% of people with HIV (more than 14 million) remain undiagnosed and do not know their infection status.

Did you know?

Before a vaccine is licensed in the USA, the Food and Drug Administration (FDA) reviews it for safety and effectiveness. The CDC then reviews all studies again, as well as the American Academy of Pediatrics and the American Academy of Family Physicians. Every lot of vaccine is tested before administration to the public, and the FDA regularly inspects vaccine manufacturers' facilities.

Did you know?

Cancer has been around as long as humankind, but only in the second half of the twentieth century did the number of cancer cases explode.

Did you know?

Elderly adults are at greatest risk of stroke and myocardial infarction and have the most to gain from prophylaxis. Patients ages 60 to 80 years with blood pressures above 160/90 mm Hg should benefit from antihypertensive treatment.

Did you know?

Aspirin is the most widely used drug in the world. It has even been recognized as such by the Guinness Book of World Records.

Effect of pH on oxygen binding to hemoglobin Effect of pH on oxygen binding to hemoglobin
Effect of Stress on Immune Function Effect of Stress on Immune Function
Effect of Landfall Effect of Landfall
Lake-effect snow: Cold air over warm water Lake-effect snow: Cold air over warm water
Cocaine’s Effect on the Brain Cocaine’s Effect on the Brain
Main components of the human endocrine system and the effects of their secretions Main components of the human endocrine system and the effects of their secretions
Video: Gastrin (protein digestion)

For a complete list of videos, visit our video library