Answer:
The correct answer is option d.
Explanation:
A leftward shift in the money demand curve would cause the demand for money to decline. As a result, the interest rate will fall and the equilibrium quantity of money will decline as well.
If the Fed wants to restore the interest rate to its original value, it has to decrease the money supply.
It needs to adopt a contractionary monetary policy. The fed can sell bonds in the open market, the payment made by the sellers will be deducted from their bank accounts.
This will decrease the reserves of the bank. This further decreases their lending capacity. As the supply of money decreases, the interest rate will increase.
Answer:
it does not measure quality-of-life factors ; it does not account for distribution of wealth ; it fails to measure non monetary (home production) activities
Explanation:
Real GDP is the total value of goods & services produced in an economy, during a period of time. But it is not correct measure of welfare level.
- It does not measure non monetary production, like hobby production eg kitchen gardening, self made paintings, music. But, they increase welfare
- It does not take into consideration the qualitative factors affecting welfare like pollution, crime & literacy. Externalities cause extra benefit or harm to welfare level, but are excluded from GDP.
- Inequitable distribution of per capita (average) GDP increases rich poor standard of living divide. So, the distribution effect ignored make GDP an inapt measure of average welfare level.
Real GDP adjusts the value of goods & services for price change (Inflation), it is a correct measure of increase in real flow of goods & services. GDP & health positive correlation is a favouring point for GDP as a measure of welfare. So, these options are incorrect.
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