Author Question: Monetary policy affects which of the following variables in the long run? A) the level of output ... (Read 47 times)

DelorasTo

  • Hero Member
  • *****
  • Posts: 548
Monetary policy affects which of the following variables in the long run?
 
  A) the level of output
  B) the rate of unemployment
  C) the rate of inflation
  D) the real interest rate
  E) all of the above

Question 2

Suppose the central bank increases the rate of growth of the money supply. What effect will this increase in money growth have on seignorage in: (1 ) the short run; and (2 ) the medium run? Explain.
 
  What will be an ideal response?



emily12345

  • Sr. Member
  • ****
  • Posts: 321
Answer to Question 1

C

Answer to Question 2

Seignorage equals the rate of growth of H times real money balances. In the short run, the increase in money growth will likely cause an increase in seignorage as long as H/P does not change or does not fall significantly. H/P is a function of real income and the nominal interest rate. In the short run, Y will rise and i will likely fall so H/P will increase. In the medium run, Y will not change. The increased money growth will cause an increase in inflation and an increase in the nominal interest rate causing H/P to fall. Therefore, the effects of an increase in money growth on seignorage are ambiguous.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

The term pharmacology is derived from the Greek words pharmakon("claim, medicine, poison, or remedy") and logos ("study").

Did you know?

Hip fractures are the most serious consequences of osteoporosis. The incidence of hip fractures increases with each decade among patients in their 60s to patients in their 90s for both women and men of all populations. Men and women older than 80 years of age show the highest incidence of hip fractures.

Did you know?

Medication errors are more common among seriously ill patients than with those with minor conditions.

Did you know?

In most climates, 8 to 10 glasses of water per day is recommended for adults. The best indicator for adequate fluid intake is frequent, clear urination.

Did you know?

Lower drug doses for elderly patients should be used first, with titrations of the dose as tolerated to prevent unwanted drug-related pharmacodynamic effects.

For a complete list of videos, visit our video library