According to the quantity equation, if inflation is 0.1 percent, the growth rate of money is 7.3 percent, velocity growth is -3.1 percent, and real GDP growth is In the classical dichotomy. is fixed, so real GDP growth is predicted to be. OA.4.4; velocity: 0 OB.4.1; velocity, 7.2 OC.-6.1; inflation; 6.1 OD.2.9; velocity: 7.3 OE. 4.2; money growth; 3.1

According to the quantity equation, if inflation is 0.1 percent, the growth rate of money is 7.3 percent, velocity growth is -3.1 percent, and real GDP growth is In the classical dichotomy. is fixed, so real GDP growth is predicted to be. OA.4.4; velocity: 0 OB.4.1; velocity, 7.2 OC.-6.1; inflation; 6.1 OD.2.9; velocity: 7.3 OE. 4.2; money growth; 3.1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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a. Suppose that the central bank wants to set policy rate (or real rate) at 4%. If expected inflation is 3%, this means that they must set the nominal interest rate to b. Now suppose that the zero lower bound has been reached and expected inflation is 3%. In this situation, the central bank cannot lower the real rate below: a) 7%; -3% b) 7%; 3% c) 4%; d) 1%; 1% 4%
1. For this question assume that inflation is zero. Consider a 2-period economy. Assume that consumer's lifetime utility is given by: U = log c, + 0.9 log c2 Assume that the consumer starts period 1 with the initial wealth of 50,000. The consumer gets labour income y, - T; in period t (t=1,2), where: y1 = 25,000, y2 = 120,000, T, = 5,000, T, = 12,200 and R=0.05 Initially assume that there are no borrowing constraints. a. Write down the Euler equation (with all values substituted) and explain its meaning. Write the intertemporal budget constraint and explain its meaning. b. Solve the consumer's problem of maximizing lifetime utility subject to the intertemporal budget constraint. Is the present value of consumption in the first and the second periods the same? Explain why. c. If for some reason the consumer were to face the borrowing constraint, would it be binding? Explain.. d. Assume that in the economy described in this part, the government decides to build some new roads in period…
gyt=9mt t Ut - Ut_1= − ß(gyt – gy) πι-πι-1=-α(ut – un) The beta in Okun's law is 0.4 The alpha in the Philips curve is 1. The natural rate of growth is 5%. The Natural Unemployment rate is 6% The policy instrument is money growth gmt. 1. The Economy is at its medium-run equilibrium with inflation at 8%. What is the current growth rate of the Money Supply, gmt? 2. Given the above conditions if the Central Bank decides to follow a disinflation strategy and bring its level down from 6% to 2% over a period of 2 years then stabilize the economy. What will happen to Unemployment, Inflation and Money Growth in the next few years? 3. Define a point year of excess unemployment and the sacrifice ratio.
Suppose that u, = 5% and that 7-1=2%. If un = 6%, we know that: A, inflation in t will equal 2%. inflation in t will be less than 2%. В. inflation in t will be greater than 2%. OC. more information is needed to answer this question.
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15. Suppose money growth is 7% and output growth is 3%. What is the expected long run increase in prices predicted by the quantity equation? а. 10% b. 7% с. 4% d. 3%
9.Money neutrality is a long-run prediction of which model? a.the solow growth model b.the RBC model c.the New Keynesian model d.a&b e.b&c
Note:- • Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. • Answer completely. • You will get up vote for sure.
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
12.In the RBC model, assume you observe an initial economic growth rate of 10%, and an initialinflation rate of 2%. Further assume that the equilibrium unemployment rate in the economy is 2.3%.Following a permanent, positive aggregate demand shock, which of the following are potential long-rununemployment rates in this economy? a.12% b.6% c.8.3% d.2.3% e.all of the above
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