TZ 14

inflation

according to the quantity theory of money (classical economists), expansionary monetary policy will result in...?

the purchase of bonds by the Fed

An increase in the money supply results from...?

decrease in output in the short run

An unanticipated decrease in the money supply will result in a...?

interest rates

An unexpected increase in the money supply will first impact...?

lower right

An unexpected increase in the money supply will lead to _____ interest rates and shift the aggregate demand curve to the ___

remains unchanged

As interest rates rise, money supply

increases

As the interest rate falls, the demand for money ...?

decreases

As the interest rate rises, the demand for money...?

open market operations

How does the Fed alter the money supply?

no change in real GDP and increase in price level

If the economy is experiencing full employment and there is an unanticipated increase in the money supply, then what will happen in the long run?

increase in real GDP and price level

If the economy is experiencing full employment and there is an unanticipated increase in the money supply, then what will happen in the short run?

increase increase no change increase

If the economy is experiencing full employment and there is an unanticipated increase in the money supply, then: ____ in real GDP in the short run ____ in the price level in the short run ____ in real GDP in the long run ____ in the price level in the long run (aka infaltion)

an increase in prices aka inflation

In the long run, the results of expansionary monetary policy include...?

yes

Is timing important when implementing monetary policy?

increase in real interest rates leading to a decrease in consumption and investment

the short run result of a decrease in the money supply unexpectedly is an...?

Vertical Money Supply Curve

This curve reflects the fact that *the interest rates do not affect money supply.* Only the Fed can alter the money supply.

inverse

What is the relationship between the interest rate and the demand for money?

lower

When the Fed increases the money supply unexpectedly, there is an increase in aggregate demand since _____ real interest rates will stimulate business investment and consumer purchases.

increases buying lower increase higher

When the Fed utilizes expansionary monetary policy, it ____ the money supply by _____ bonds. This will lead to ______ interest rates, a ____ in aggregate demand, and ______ inflation.

decreases selling higher decrease lower

When the Fed utilizes restrictive monetary policy, it ____ the money supply by _____ bonds. This will lead to ______ interest rates, a ____ in aggregate demand, and ______ inflation.

interest rate

changes in the ________ do NOT affect the money supply

interest rate

changes in the money supply will affect the __________