Central Banks around the world started doing Quantitative Easing because they had reached the zero lower bound. What does it mean? They had run out of gold to use Inflation was already at 0% The interest rate was already at 0% and couldn't be lowered more
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- Consider two countries, A and B. In A, new technologies (e.g., mobile payment apps and cryptocurrencies) have been enthusiastically adopted by the population, thereby reducing the proportion ofincome that is held as real money balances. Over this period, no such changes occurred in B. Ifthe rate of money growth and the growth rate of real GDP were the same in A and B over thisperiod, then how would the rate of inflation differ between the two countries?. The following questions relate to Monetary Systems What is the relationship between Factor Mobility and Foreign Direct Investment?stant, does this zero-inflation goal require that the rate of money growth equal zero? If yes, explain why. If no, explain what the rate of money growth should equal. 4. The economist John Maynard Keynes wrote in The Economic Consequences of the Peace (1919): "Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can con- fiscate, secretly and unobserved, an important part of the wealth of their citizens." Justify Lenin's assertion. 5. Suppose that a country's inflation rate increases sharply.. What happens to the inflation tax on the holders of money? Why is wealth that is held in savings accounts not subject to a change in the inflation tax? Can think of any way in which holders of savings accounts are hurt by the increase in the inflation rate? you 12 6. Hyperinflations are extremely rare in countries whose central banks are independent of the rest of the ernment. Why might…
- .Why do you think currencies of countries with high inflation rates tend to have forwarddiscounts?Supposeyouhave$200,000inabanktermaccount.Youearn5%interestper annum from this account. You anticipate that the inflation rate will be 4% during the year. However, the actual inflation rate for the year is 6%. Calculate the impact of inflation on the bank term deposit you have and examine the effects of inflation in your city of residence with attention to food and accommodation expenses.We saw that former Federal Reserve Chairman Ben Bernanke argued thatlow interest rates in the United States during the mid-2000s were due to a globalsavings glut rather than to Federal Reserve policy. In an interview with Albert Huntof Bloomberg Television, Alan Greenspan, who was Federal Reserve Chairman fromAugust 1987 through January 2006, made the following similar argument: Behind the low level of long-term rates: a global savings glut as China,Russia and other emerging market economies earned more money on exportsthan they could easily invest. (a) Use two loanable funds graphs to illustrate Greenspan’s argumentthat a global savings glut caused low interest rates in the United States. Onegraph should illustrate the situation in the United States, and the other graphshould illustrate the situation in the rest of the world.(b) Why should Alan Greenspan care about a debate over the causes oflow interest rates?
- When the Bank of Canada sells a Canadian government bond, what are the effects on the volume of loans issued by the banking system and on investment? a. The volume of loans issued by the banking system increases, and investment tends to increase. b. The volume of loans issued by the banking system increases, and investment tends to decrease. c. The volume of loans issued by the banking system decreases, and investment tends to increase. d. The volume of loans issued by the banking system decreases, and investment tends to decrease.The primary economic function of the "financial system" is to provide "financial intermediation," which means: Select one: O a. keeping the inflation rate at zero, ceteris paribus. b. keeping the inflation rate at the Treasury's "target rate" ceteris paribus. c. matching one person's consumption expenditures with another person's capital expenditures. d. matching one person's borrowing with another person's saving.Which of these is True? O. The world credit-money supply was hugely contracted before the crash, which is why homes were so expensive O. Central Banks create 'Base Money O. Central Banks create all the money supply O. The collapse of hte dollar is the reason the US housing market was flooded with loanable funds O. Central Banks promoted speculation (perhaps unwittingly with their tight money policy in the years of the pre 2008 bubble O. Private banks only pass on deposits when they make loans 8. Private banks create money. O. True O. False
- Interest rate Central bankers in Widgetsa have decided that inflation is too high and contractionary monetary policy is needed. First, position LRAS where it would be if contractionary policy is needed. Then, show the short-run results of this policy action by shifting the appropriate curves on the graphs. Quantity of loanable funds Demand LRAS Supply Price level Select all of the actions that are contractionary policy choices the central bankers could use. increase taxes sell bonds to banks decrease government spending raise the interest rate for last-resort loans decrease reserve requirements Real GDP AD SRAShow does yield on short-term treasury bills tops us inflation?What will be the inflation on Moneys if it is not invested ?