chapter 14 monetary policy

Question 1

what is meant by the demand for money?

Answer 1

the amount of one’s portfolio (wealth) held in the form of money

Question 2

How does unanticipated monetary policy work if the economy starts in a recession?

Answer 2

expansionary monetary policy will lower interest rates and increase aggregate demand; will expand real output

Question 3

the long-term and short-term effects of unanticipated money supply changes

Answer 3

In the short run, shifts in monetary policy exert an impact on real output and employment. A shift to a more restrictive policy will tend to reduce real output and employment, while a shift to a more expansionary monetary policy will tend to increase them.

The long-run impact will be inflation and higher nominal interest rates, without any positive impact on real output and employment. The more rapid the sustained growth rate of the money supply (relative to real output), the higher the expected rate of inflation.

Question 4

Which lag(s) hinder the use of monetary policy as a stabilization tool?

Answer 4

time lags, idk what else