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Svetach [21]
2 years ago
10

What are the results of contractionary monetary policy, which intends to slow down the economy, and what are not

Business
1 answer:
geniusboy [140]2 years ago
8 0

The following are results of contractionary monetary policy:

  • raises interest rate
  • increases investment spending
  • reduces money supply

The following are not results of contractionary monetary policy:

  • increases real GDP in the short run
  • increases consumer spending
  • increases aggregate demand in the short run

<h3>What is a contractionary monetary policy?</h3>

Monetary policy are policies taken by the central bank of a country to shift aggregate demand and / or change the money supply in the economy.

There are two types of monetary policy :

Expansionary monetary policy : these are polices taken in order to increase money supply. When money supply increases, aggregate demand increases. Reducing interest rate and open market purchase are ways of carrying out expansionary monetary policy

Contractionary monetary policy : these are policies taken to reduce money supply. When money supply decreases, aggregate demand falls. Increasing interest rate and open market sales are ways of carrying out contractionary monetary policy

To learn more about monetary policy, please check: brainly.com/question/3817564

#SPJ1

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If the marginal propensity to consume is equal to 0.85, then a $500 increase in disposable income leads to a:
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The question is incomplete. The complete question is stated below.

If the marginal propensity to consume is equal to 0.85, then a $500 increase in disposable income leads to a:

a. $400 increase in consumption spending

b. $75 increase in consumption spending

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Answer:

If a $500 increase causes an increase of $425 in consumer spending, the rest of $75 is the increase in personal saving. Thus, option D is the correct answer.

Explanation:

The marginal propensity to consume or MPC is the percentage of the additional income that will be used for consumption spending. It is a concept that is used to calculate how much of an increase in income will be used in consumption and saving. The formula to calculate MPC is,

MPC = Change in consumer spending / Change in income

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500 * 0.85 = Change in consumer spending

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