please urgently do this Exercise 1cr+1Consider the money supply Ms=mxB , m =cr+rrAssume that the demand for real money is given by the equation (M/P)d=0.25Y, and that the output hasbeen growing 3% per year.Assume, further, that you have been called before Congress to testify about the long-run effects ofincreasing the growth of the money supply to 10 % per year.1. State, compute and explain the long-run effects of this change on the inflation rate, on the nominalinterest rate, on the real interest rate, on investment and on the real GDP. For each of them, argueboth using the formulae that we studied and the macroeconomic dynamic beyond the effect.2. Compute the implied money velocity. Suppose that the actual nominal value of the output (PY) is1000, the value of the reserves is 50 and the toal value of the deposits is 75. Find the actual moneymultiplier.3. State the different ways in which the central bank can achieve the change (+10%) in the moneysupply (think about the variables that can affects Ms), arguing about the pros and cons of each one.Which one do you think is better and why?

Since the question you have posted consists of multiple parts, we will answer the first two parts…

cr+1 Consider the money supply Ms=mxB , m= cr+rr Assume that the demand for real money is given by the equation (M/P)d=0.25Y, and that the output has been growing 3% per year. Assume, further, that you have been called before Congress to testify about the long-run effects of increasing the growth of the money supply to 10 % per year.

cr+1 Consider the money supply Ms=mxB , m= cr+rr Assume that the demand for real money is given by the equation (M/P)d=0.25Y, and that the output has been growing 3% per year. Assume, further, that you have been called before Congress to testify about the long-run effects of increasing the growth of the money supply to 10 % per year.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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