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- Price stability: Suppose you are the head of the central bank and your mandateis to maintain the price level at a constant value. Explain what you would doto the money supply in response to each of the following events:(a) Real GDP increases by 4% during a boom.(b) Real GDP declines by 1% during a recession.(c) Real GDP is growing at 3% per year.(d) Te velocity of money increases by 2%.(e) Te velocity of money declines by 1%.If a central bank buys government securities from the private sector-money markets,leading to an expansion of the money supply, other things being equal, what would theeffect be on the following?(d) Aggregate Supply(e) Aggregate Demand(f) Economic activity(g) Price level of the economy can you help giving me these 4 ans.d. Suppose that changes in the bank regulations expand the availability of credit cards so thatpeople need to hold less cash.(i) How does that affect the demand for money? (ii) If the Central Bank does not respond to this event, what will happen to the pricelevel?
- 3. Explain any three costs associated with inflation? Also, provide a real-world example of hyperinflation that happened in the past.3.In economics, what does the term "inflation" refer to?a) The rate at which a currency depreciatesb) A decrease in the overall price levelc) An increase in the overall price leveld) A decrease in the supply of money1.Monetary equilibrium occurs when theQuestion options: A) supply and demand for all goods in the economy are equal at the current rate of interest. B) existing supply of money is willingly held by households and firms in the economy at the current rate of interest. C) growth in the money supply is zero. D) the money supply is growing at a constant rate. E) nominal rate of interest equals the real rate of interest. 2.The economy starts in long-run equilibrium. After an initial shock, and the subsequent adjustment process, the economy ends up at a point with a higher price level and the initial level of real GDP. Which of the following initial shocks would explain this?Question options: a) An increase in desired savings. b) An increase in government transfer payments. c) An appreciation of the Canadian dollar. d) An improvement in production technology. e) An increase in the cost of factor inputs. 3.The economy starts in long-run equilibrium. After an initial shock, and the subsequent…
- 2. What two features of the Indian economy meant that an increase in rice prices was likely to spread through the economy and influence the overall inflation rate?9) Explain why inflation may tend to accelerate.Explain why the aggregate short-run aggregate supply curve is upward sloping? How does it help to explain the downward slope of the aggregate demand cure? d. Suppose that changes in the bank regulations expand the availability of credit cards so thatpeople need to hold less cash.(i) How does that affect the demand for money? (ii) If the Central Bank does not respond to this event, what will happen to the price level?
- 5. Which of the following assets performs best in times of cost-push inflation? (A) Gold. (B) Agricultural real estate. (C) Stocks. (D) Bonds. 6. The Bank of Canada wishes to reduce the money supply, implementing a tight monetary policy. Which of the following is NOT consistent with this goal? (A) Reducing the reserve requirement for banks. (B) Selling government bonds. (C) Increasing the target for the overnight rate. (D) Printing less currency. 7. Suppose that the Bank of Canada increases the Bank Rate from 0.25 to 7 percent. Which of the following is the Overnight Rate Target? (A) 7.25 percent. (В) 7 percent. (С) 6.75 рercent. (D) 6.5 percent. 8. Consider a fractional-reserve banking system in which an initial deposit of $1,000 can generate up to $1,000,000 in money. What is the reserve ratio? (А) 10 рercent. (B) 5 percent. (C) 1 percent. (D) 0.1 percent.Question: In an economy where the central bank adopts a policy of inflation targeting, what is the most likely impact of a sudden and significant increase in global oil prices? A. A decrease in the central bank's target inflation rate to counteract imported inflation. B. An increase in the central bank's key interest rate to mitigate the risk of rising inflation. C. A commitment to maintaining the current monetary policy stance, disregarding the external price shock. D. An immediate decrease in the key interest rate to stimulate economic growth and offset the negative impact of higher oil prices.5) Use appropriate formulas to derive the following conclusion " A rise in thecountry's expected inflation rate will eventually cause an equal rise in the in-terest rate that deposits of the currency offer." (Explain what approaches ortheorems you are applying in each step in your derivation )