Purchase Solution

Effects of an announced future money supply decrease

Not what you're looking for?

Ask Custom Question

If the demand for money depends positively on real income and depends inversely on the nominal interest rate, what would happen to the price level today if the central bank announces (and people believe) that it will decrease the money growth rate in the future, but it does not change the money supply today?

Purchase this Solution

Solution Summary

This solution gives a 1-paragraph explanation of what would happen to the price level today if the central bank announced that it would decrease the money supply in the future.

Solution Preview

In the future the money supply growth rate will decrease, so the price of money, i.e. the nominal interest rate, will increase. The demand for money varies ...

Purchase this Solution


Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.