Contrast the Keynesian and Monetarist views on how a change in the money supply impacts the economy.
What will be an ideal response?
According to Keynesian economists, an increase in the money supply will reduce interest rates, stimulate borrowing and spending, shifting the aggregate demand curve to the right, which increases real GDP (if we are not already at full employment). The impact of this expansionary monetary policy on inflation depends on which range we are in along the aggregate supply curve.
Monetarists, using the quantity theory of money, believe a change in the money supply has a much more direct and predictable impact on the economy. The monetarists do not see a change in the money impacting the economy by first effecting interest rates.
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If marginal cost is constant, what happens to a market if it alters from perfect competition to monopoly without any change in the position of the market demand curve or any variation in costs?
A) Consumer surplus increases, and the previously existing deadweight loss decreases. B) Consumer surplus increases, and the previously existing deadweight loss increases. C) Consumer surplus is eliminated, and an equal-sized deadweight loss is created. D) Consumer surplus decreases in size, and a deadweight loss is created.
The integration of expectations into macroeconomic analysis indicates that
a. fiscal policy is more potent than monetary policy. b. monetary policy is more potent than fiscal policy. c. once people come to expect a given rate of inflation, the inflation will neither stimulate real output nor reduce unemployment. d. higher rates of inflation will lead to lower rates of unemployment in the long run but not in the short run.