Assuming that at equilibrium real money supply (M$/P) is equal to real moneydemand (Md /P), which is assumed to be a function of real income (Y), nominalinterest rate (R), and technology (A) as follows:MSY=A-RP(a) Specify the assumptions needed to uphold the prediction of quantitytheory of money claiming that the ratio of money to GDP is constant in thelong run.e(b) Assuming that the growth rate of Y is 4%, the growth rate of R is 0, andthe growth rate of A is -1%, draw a diagram to indicate the relation betweengrowth rate of MS (on the X-axis) and inflation rate (on the Y-axis).

Answer- Given in the question- Ms/ P = Md/ P = AY/R A Answer - Need to find- Specify assumptions…

Answered: Assuming that at equilibrium real money…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Through bond purchases, a nation's central bank injects money into the economy. One of the short-term effects is to drive the price level from 100 up to 104.2. Other short-term effects occur as well, but these fade in the long run, even as the price level climbs still higher.Model the short- and long-term effects in the graph below by dragging one or more curves to new positions. 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.
For each of the changes below provide a narrative explanation and a graphical explanation of how the change will impact the economy's equilibrium price level and equilibrium quantity of output produced a) The federal reserve significantly increases the interest rate it pays banks for holding excess reserves. b) The government increases the income tax rate of households by 3%
Suppose the price level in the economy is fixed at P and the exogenous money supply is given by M, Suppose the LM curve for these values of exogenous variables is drawn as in the figure below where Y is aggregate output and r is interest rate. Consider two points A and B in the diagram Assuming all exogenous variables remain unchanged, pick the correct relation between the nominal money demand Md at point A and point B. Scroll down to view the full image. C A MAYA,TA) > Md(YB, TB) B Md(YA,TA)=Md(YB, TB) M(YA,TA)
For each of the changes below provide a narrative explanation and a graphical explanation of how the change will impact the economy's equilibrium price level and equilibrium quantity of output produced a) The federal reserve significantly increases the interest rate it pays banks for holding excess reserves. b) The government increases the income tax rate of households by 3%
Using a separate set of AS-AD diagrams for each of the following scenarios, explain what is likely to happen to the output (Y), unemployment, price level, and inflation in the short run, making sure to explain the shifts in any curve: a. U.S. households decide to save more and more than doubles the total savings per year. b. With the news of rapid vaccinations, the consumer and business confidence surges. c. Natural gas is now the most important source of power in the U.S. And, since the advent of fracking, it is also the cheapest. New administration imposes a ban on fracking which increases the prices of not only natural gas, but all carbon fuels. d. The U.S. is currently described as mostly recovered from the pandemic induced recession. Congress and the White House enacts a $2 Trillion “infrastructure” spending.
The following equations relate to a certain economy, peruse them and answer thefollowing questions.T = 0.75Y (tax rate)L= Y - 100r (Real money demand)M = 300 (Read money supply)C = 200 + 0.25Y d (Consumption function)I = 20 - 10r (Investment function)G = 30 (government purchases) i) Derive equations fro IS and LM curvesii) Determine the rand y pair at which the two markets are clearing iii) Compute the values of C, I and L.
According to our analysis of a worker's choice of how much to save for retirement using our model of consumer choice theory, which of the following will raise the relative price of future consumption? An increase in the inflation rate Both an increase in the inflation rate and an increase in the interest rate Neither an increase in the inflation rate nor an increase in the interest rate An increase in the interest rate
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.
Consumption and the real interest rate: According to the life-cycle / permanent-income hypothesis, consumption depends on the present discounted value of income. An increase in the real interest rate will make future income worth less, thereby reducing the present discounted value and reducing consumption. To incorporate this channel into the model, suppose the consumption equation is given by Assume the remainder of the model is unchanged from the original setup, as in Table 11.1. (a) Derive the IS curve for this new specification. (b) How and why does it differ from the original IS curve?
An economy has an unemployment rate of 11% and real GDP grows by 2.5% annually. A treasury official says next year's expected growth rate of 4% is ecpected to bring down the enemployment rate to 8% within one year. However, an economists disagrees as it is non consistent with macroeconomic research. -who is correct? the treasury official or the economist and why?
PLEASE ANSWER ALL PARTS OF QUESTIONS 1 AND 2.
Discuss the Lucas Critique of traditional structural Keynesian macroeconomics. Explain why the Euler Equation below is immune to the Lucas critique and explain its main implications for household consumption. u' (C₁) = (1 + 1) E₁u' (C (+1) Ct is consumption at time t and C++1 is consumption in the next period p> 0 is the rate of time discount (degree of impatience) i is the fixed interest rate on a risk free asset Et is the expectation at time t (today)

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