Suppose the economy is initially in long-run and short-run equilibrium.If the Bank of Canada decides to pursue a contractionary monetary policy,we will see
A) bond prices fall,interest rates fall,aggregate demand remain unchanged as consumption spending decreases,but investment spending increases.Real national income remains constant in both the short run and the long run,but the price level falls in both.
B) bond prices fall,interest rates rise,aggregate demand fall as investment and consumption spending decrease,and real national income and the price level decreasing in the short-run,but only the price level decreasing in the long run.
C) bond prices fall,interest rates rise,aggregate demand falls as investment spending decreases and consumption spending remains unchanged,and real national income and the price level decrease in the short run,but only the price level fall in the short run.
D) interest rates rise but no change in bond prices.Aggregate demand falls as consumption spending and investment spending decrease,and the price level and real national income fall in both the short run and the long run.
Correct Answer:
Verified
Q35: The transactions demand for money will increase
Q36: The interest rate that the Bank of
Q37: The primary tool the Bank of Canada
Q38: Initially,all banks have zero excess reserves and
Q39: The desired reserve ratio is 10%.The bank
Q41: Keynesians argue that for a change in
Q42: The transactions demand for money
A)varies directly with
Q44: When households hold money (currency)for unplanned expenditures
Q45: Suppose a family is holding $1,000 in
Q53: The asset demand for money is related
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents