Changes in quantity of money lead to real changes in economy

Assignment Help Business Economics

Reference no: EM13834794

Changes in the quantity of money lead to real changes in the economy. If this is the case, why would the central bank ever stop increasing the money supply?

a. Increasing the money supply is not a politically popular action and may lead to leaders of the central bank not getting re-elected.

b. The government has rules in place on the maximum amount the money supply can be increased in a given fiscal year.

c. Although there is a short-run incentive to increase the money supply, these effects wear off in the long run as prices adjust and then drive down the value of money.

d. The short-run benefits are outweighed by the short-run costs of increases in the money supply.

e. Although there is a short-run incentive to increase the money supply, these effects wear off in the long run as prices adjust and then drive up the value of money.

Reference no: EM13834794

Questions Cloud

Project is estimated to require an investment : A project is estimated to require an investment of $25,000, have a life of 5 years and 0 salvage value and have an annual net cash flow that can be described by a symmetric triangular distribution with a = $5,000, and b = $12,000. If the minimum requ..

Prescription medications : Critically analyze the pros and cons of putting a price ceiling on prescription medicine. Make sure to use concepts from the chapter in this unit such as government intervention, inefficiencies, price elasticity, etc. In the first case, assume the me..

Affect the market clearing price and quantity in each market : Discuss how each of the following will affect the market clearing price and quantity in each market. Discuss how the supply and /or demand curves will shift in the following cases (if at all) Incomes rise and the good is a normal goods.

Describe the pros and cons of the oligopolistic firms : Big pharmaceutical companies are oligopolies and as such their strategic decisions are influenced by the rival's actions. Describe the pros and cons of the oligopolistic firms in the healthcare sectors

Changes in quantity of money lead to real changes in economy : Changes in the quantity of money lead to real changes in the economy. If this is the case, why would the central bank ever stop increasing the money supply?

What are the average and marginal costs of a blood draw : It takes a phlebotomist 10 minutes to complete a blood draw. The supplies for each draw cost $5 and the phlebotomist earn$25 per hour. the phlebotomy lab is designed to accommodate 24000 draws per year. its rent is 100,000 per year. what are the aver..

According to the fisher equation : According to the Fisher equation, if a bank extends a loan for 3% and the inflation rate ends up being 5%:

Recall the loser pay winner auction experiment done in class : In the formula for Bayes theorem if the w-probability is greater than the zero than the a-probably is less than the b-probability. Posted offer markets with at least two sellers will generate prices that remain a little above prices from double aucti..

User Account

All Pages