The residents of Meryton have been accustomed to 2percentage inflation and money
ID: 1208730 • Letter: T
Question
The residents of Meryton have been accustomed to 2percentage inflation and money supply growth of 2percentage for many years. However, a new central banker is appointed and decides that the money supply should instead grow at 5percentage per year. Given that Mervton residents form their expectations by averaging the past 2 years' rates, which of the following is a likely value for the realized inflation rate next year, which can be considered the short-run? 2percentage 3percentage 5percentage 7percentage The IS curve is the collection of all those airs of the money supply and real income consistent with the AS curve. is the collection of all those pairs of interest rates and real income consistent with equilibrium in the market for final goods and services. shifts out when expectations of the price level increase. shifts in when autonomous spending increases. Ceterus paribus, in theAD/AS/IS/LM model, the short-term effect of an exogenous increase in T is to shift the LM curve out. to shift the IS curve out. to shift the AD curve in. to shift the AS curve in. Ceterus paribus, in the AD/AS/IS/LM model, the short-term effect of an exogenous increase in the nominal money supply is to shift out the AS curve to shift out the IS curve to shift out the AD curve. to shift in the LM curve.Explanation / Answer
11. Option C is correct.
This is so because, the money supply has gone up by 5%, and so will the relaised inflation rate which would be higher than the expected inflation.
12. Option B is correct.
IS curve is a locus of all the points where the goods market is in equilibrium.
13. Option C is correct.
This is so because an increase in the level of taxes, the disposable income is reduced which is a part of the consumption function and further component of AD. With a fall in consumption the AD curve would shift in.
14. Otion C is correct.
With a increase in money supply the AD curve would shift out to the right.