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Contact [7]
3 years ago
10

According to the theory of liquidity preferences, expanding the money supply will _____ nominal interest rates in the short run,

and, according to the Fischer effect, expanding the money supply will _____ nominal interest rates in the long run. Group of answer choices increase; increase; increase; decrease decrease; increase decrease; decrease
Business
1 answer:
vlada-n [284]3 years ago
5 0

Answer: decrease; increase

Explanation:

According to the Liquidity Preference theory, in the short run, increasing money supply will mean that there is more money in the economy which translates to more money for investment. This will lead to a decrease in interest rates as there are more sources of investment.

In the long run however, the Fischer effect shows interest will move with inflation. If money supply is expanded, it will lead to inflation in the long run because there will be more demand. This rise in inflation will cause interest rates to rise as well.

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Answer:

b. $750 and $500 

Explanation:

The reserves is the amount of deposit required by the Central bank that banks should keep as reserves.

The excess reserve is the amount left after the reserve has been taken from the deposit.

If deposit is $750 and the reserve ratio is 331/3%, the amount of reserves is 0.333 × 750 =$250

Excess reserve = $750 - $250 = $500

But the bank sent $750 as reserves, so the reserve increases by $750 and the excess reserve increases by $500

I hope my answer helps you.

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irga5000 [103]

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