<p>Lol I don’t think any of those were even options .-.
I forgot all the other mult choice tho</p>
<p>Crap I shouldn’t have put any justifications if they didn’t ask to, but I was just trying to play it safe. Is a right answer with wrong reasoning wrong?</p>
<p>If there was something with the federal funds rate then I think a decrease in that is expansionary. Idk, I’ve never seen that anywhere, but it was on two multiple choice questions. >_></p>
<p>@FastNeutrino: Did the question ask for government (fiscal) policies? If so, only the first 2 would work, since the other 3 are monetary policies, not controlled by the government.</p>
<p>I only missed the shift on the Phillips curve. The SRPC.</p>
<p>Isn’t it $50,000 for that multiple choice question?</p>
<p>I’m pretty sure it’s $40 000… The banks create $10 000 * (1/0.2) = $50 000 of checkable deposits, but $10 000 of that $50 000 was cash converted to checks, not actually created money, so only $40 000 was made by an increase in the money supply. (The question was how much the bank can increase money supply, not how much it can loan out)</p>
<p>Also, was the Short Run Philips Curve supposed to shift up? My classmates said that it’s a movement to the left along the curve, but I put that it shifts up, since the expected inflation doesn’t affect the unemployment rate, so at every level of unemployment, inflation increases by some amount.</p>
<p>I guess my teacher taught us wrong…fantastic. For the Phillips curve, I shifted it up.</p>
<p>@SideDishes: I don’t remember the question, but yes, you’re right. There were also a couple that asked specifically for OMOs, so two choices would be something like “buying bonds” and “decreasing reserve ratio,” but the latter is wrong because it’s not an OMO.
Also, I shifted SRPC up. The only thing that shifts phillips curves is actually expectations of inflation, because the expectation doesn’t really change output.</p>
<p>The one about the increase in AD had to be a fiscal policy. And I thought that the euro would depreciate with higher interest rates than the US. Investment in Europe would decrease, decreasing the demand for the euro and it’s value relative to the dollar. It should have been 40000, I forget to only multiply by the loans.</p>
<p>“An increase in the inflationary expectations causes an increase (rightward shift) of the aggregate curve. A decrease in the inflationary expectations causes a decrease (leftward shift) of the aggregate curve.” So expectations are a determinant of aggregate demand and with expectations of inflation there will be upward movement along the SRPC, not a shift upward (associated with a shift in SRAS not AD).</p>
<p>@TheBombingRange: A higher interest rate in Europe means that less money goes into the foreign exchange market, so the exchange rate for the euro rises (appreciates). Your answer is what would happen long term, I think, but they just want what happens before anyone can react to the change in interest rate.
@agmazzuckelli: Expectations in inflation are a determinant in shifting the Phillips curve.
[The</a> Phillips Curve](<a href=“http://www.tutor2u.net/economics/revision-notes/a2-macro-phillips-curve.html]The”>http://www.tutor2u.net/economics/revision-notes/a2-macro-phillips-curve.html)
I explained incorrectly, I believe. Shifts of the PC are associated with shifts in SRAS, expectations of inflation being one of them. Think of it this way:
- Expectations of inflation shifts SRAS left (higher wages = higher factor cost)
- This decreases output (higher unemployment)
- HOWEVER, inflation doesn’t increase right away as it is still only anticipated. (prices are sticky according to most economists)
- So, in the short run, the Phillips curve just shifts to show a higher unemployment with the same inflation.</p>
<p>At least, that’s what I can come up with.</p>
<p>[It</a> seems like an increase in inflationary expectations also changes aggregate supply](<a href=“http://www.tutor2u.net/economics/content/topics/ad_as/aggregate_supply.htm]It”>http://www.tutor2u.net/economics/content/topics/ad_as/aggregate_supply.htm), so an increase in expectations decreases AS, shifting the Phillips curve to the right. But then, since it also shifts AD to the right, we move to the left along the Phillips curve, and so that might correspond to a net upwards shift in the SRPC.</p>
<p>Edit: Whoops my replies are slow. We had the exact same link FastNeutrino haha.</p>
<p>Yeah, idk, some sources list inflation expectations as a determinant of AD, some don’t. And that’s kind of important. I just know it’s a SRPC determinant.</p>
<p>Higher interest rate in Europe definitely means that currency demand decreases. Nobody want to put money into Euros, and people who have Euro’s want to switch it out to Us dollars. The demand for Euros decreases.
@ FastNeutrino By what you’re saying, the number of Euros should actually increase in the market. Because people want to switch out Euros for Us dollars, people with Euros will put in money into the foreign exchange market to swap with US dollars. The US dollars will be taken out. The supply of US dollars will decrease but the supply for Euros in the foreign exchange market will increase. Remember that the foreign exchange market is a separate market from simply currency in the economy. </p>
<p>And for the SRPC, I just showed a movement along the curve. I didn’t think higher expected inflation would actually shift it but idk.</p>
<p>Today was the last AP test for me and the last day of school so it doesn’t even matter. Honestly I kind of enjoyed taking AP tests these last few weeks haha. Going to miss them for sure.</p>
<p>I shifted the whole PC to the right. Hmm</p>
<p>Hmm, it’s interesting that it seems to be a determinant of both aggregate demand and aggregate supply. I see a lot saying it will cause a supply shock and a good bit saying it will shift aggregate demand so oh well.</p>
<p>hold up–the supply of euros in the foreign exchange market will increase? i thought they would decrease, causing a higher exchange rate/appreciation and less demand.</p>
<p>The demand for euros would decrease because they have higher interest rates, decreasing investment and depreciating the euro. There is no way there was a different answer for this one.</p>
<p>"Higher interest rates offer lenders in an economy a higher return relative to other countries. Therefore, higher interest rates attract foreign capital and cause the exchange rate to rise."from investopedia. Euro appreciates. Less demand though, because it’s ‘expensive’ relative to other countries’ currency, due to NCO dropping and therefore, the supply dropping (or shifting left in the foreign exchange market).</p>