Author Question: Suppose the economy was in equilibrium, and the central bank increased the money supply by an ... (Read 88 times)

jrubin · **on:** Jun 30, 2018

Suppose the economy was in equilibrium, and the central bank increased the money supply by an expected amount equal to 100 billion. Monetarist theory would predict that the:
a. Long-term real GDP growth will rise.
b. Long-term real GDP growth rate will fall.
c. Long-term real GDP growth rate will remain unchanged.
d. Long-term inflation rate will fall.
e. The international value of the domestic currency will rise.

Question 2

What effect does foreign exchange market intervention by the U.S. Federal Reserve to increase the value of the U.S. dollar have on the U.S. monetary base?
a. The U.S. monetary base decreases.
b. The U.S. monetary base increases.
c. It does not have an effect on the U.S. monetary base at all.
d. The effect on the U.S. monetary base is ambiguous and depends on where counterparties deposit the funds.