Please help with this. and able to h .. 8. If the money market is in the liquidi

Question

Please help with this.

and able to h .. 8. If the money market is in the liquidity trap, it is operating in the the a. vertical; investment b. vertical: money c. horizontal; investment d. horizontal; moncy demand curve ncy supply 9 According to the monctarist transmission mechanism. a decrease in the money supply aggregate demand. a. directly increases b. indirectly increases c. directly decreases d. indirectly decreases e. equals the increase in the money supply the money 10. To try to eliminate a recessionary gap the Fed typically and to try to eliminate an inflationary gap the Fed typically supply a. increases, decreases b. increases; increases c. decreases: increases d. decreases: decreases

Explanation / Answer

8> d horizontal money

Reason

The horizontal portion of the liquidity preference curve is referred to as the liquidity trap. In this portion of the curve, the demand for money is infinitely elastic with re­spect to the interest rate.

9> a directly increases

Reason

Money supply can affect the economy not only via its indirect interest effect on investment but also directly through its influence on the purchase of consumer durables as "assets".

10> A INCREASES, decreases

Reason

In recessionary gaps, the Fed uses expansionary policies and in inflationary gap, FED uses contractionary monetary policy.

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