If the economy expands, prices remain constant, and this expansion is not accommodated by a commensurate increase in the money supply: a. Interest rates are likely to fall because only falling interest rates can stimulate economic expansion. b. Interest rates are likely to rise because the demand for money will increase relative to supply. c. Interest rates are likely to remain unchanged because the money supply has not changed. d. Real GDP cannot expand without an increase in the money supply. 5 minutes.
B or C
B oo too much!!
B
nice
<> just to clarify: low rates increases demand for money and lower savings, but b/c for demand for money is going up, rates will EVENTUALLY go up???
B
I would go with d real money supply as nominal money supply / price level expansion --> price level goes ceteris paribus down (same aggregate demand, higher supply) nominal money supply will go up Am I right?
You probably are right, because most of my Economics i do guess work. lol
When the economy expands, interest rates go up b/c demand for money increases. Answer B.
Dreary Wrote: ------------------------------------------------------- > When the economy expands, interest rates go up b/c > demand for money increases. Answer B. someone just said demand for money goes up when rates are low
Dreary Wrote: ------------------------------------------------------- > When the economy expands, interest rates go up b/c > demand for money increases. Answer B. I look at it in math terms…“you cannot have all terms fixed in an equation” hence at least one variable must move
i am with you strangedays
> someone just said demand for money goes up when rates are low That’s correct. It’s also correct to say: when demand for money goes up interest rates go up. These two statements are perfectly consistent!
So what’s the answer?
Which equation are you guys talking about? I don’t know any equation, but I applied some common sense to answer this. if economy has expanded but no increase in money supply, each consumer is iwlling to pay more cuz everyone is happy in an expanding economy, but willingness to pay more means money $$ is required, so people who do have $$, will lend it at a higher rate, cuz if not at higher rate, then they could use that $ for themselves. so I said interest rate has to go up because the demand for money will increase relative to supply.
Think real life. It’s B.
pepp Wrote: ------------------------------------------------------- > Which equation are you guys talking about? I don’t > know any equation, but I applied some common sense > to answer this. > > if economy has expanded but no increase in money > supply, > > each consumer is iwlling to pay more cuz everyone > is happy in an expanding economy, but willingness > to pay more means money $$ is required, so people > who do have $$, will lend it at a higher rate, cuz > if not at higher rate, then they could use that $ > for themselves. > so I said interest rate has to go up because the > demand for money will increase relative to supply. Pepps, behind the demand and supply curve there is very advance math (however not in CFA)
Dreary Wrote: ------------------------------------------------------- > > someone just said demand for money goes up when > rates are low > > That’s correct. It’s also correct to say: > > when demand for money goes up interest rates go > up. > > These two statements are perfectly consistent! F### me. Thanks for clearing it up. This is why I am getting crushed on ECON.
I thought of B too…