i need the answer quickly Q.8. The State Bank of Pakistan is considering two alternative monetary policies:i. holding the money supply constant and letting the interest rate adjust (LM curve is positively sloped), orii. Adjusting the money supply to hold the interest rate constant (LM curve is horizontal).In the IS-L model, which policy will better stabilize output under the following conditions? Note desired level of outputis Ya. All shocks to the economy arise from exogenous changes in the demand for goods and services.b. All shocks to the economy arise from exogenous changes in the demand for money.

The policy that is known to control the channels through which new money is being supplied and the…

Q.8. The State Bank of Pakistan is considering two alternative monetary policies: i. holding the money supply constant and letting the interest rate adjust (LM curve is positively sloped), or ii. Adjusting the money supply to hold the interest rate constant (LM curve is horizontal). In the S-L model, which policy will better stabilize output under the following conditions? Note desired level of output is Y a. All shocks to the economy arise from exogenous changes in the demand for goods and services. b. All shocks to the economy arise from exogenous changes in the demand for money.

Q.8. The State Bank of Pakistan is considering two alternative monetary policies: i. holding the money supply constant and letting the interest rate adjust (LM curve is positively sloped), or ii. Adjusting the money supply to hold the interest rate constant (LM curve is horizontal). In the S-L model, which policy will better stabilize output under the following conditions? Note desired level of output is Y a. All shocks to the economy arise from exogenous changes in the demand for goods and services. b. All shocks to the economy arise from exogenous changes in the demand for money.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter15: Monetary Policy

Section: Chapter Questions

Problem 10QP

See similar textbooks

Similar questions

Q.8. The State Bank of Pakistan is considering two alternative monetary policies: i. holding the money supply constant and letting the interest rate adjust (LM curve is positively sloped), or ii. Adjusting the money supply to hold the interest rate constant (LM curve is horizontal). In the IS-L model, which policy will better stabilize output under the following conditions? Note desired level of output is Y a. All shocks to the economy arise from exogenous changes in the demand for goods and services. b. All shocks to the economy arise from exogenous changes in the demand for money.
In the monetary intertemporal model, assume that money supply is always fixed. Suppose that there is an increase in real wage. How does this change affect interest rates (both real and nominal), price level, employment, total factor productivity and equilibrium output? Carefully explain your answers. b) Suppose that, in a liquidity trap, bank reserves are less liquid than government debt. If the Central Bank conducts an open market purchase of government debt, what is the effect on price level? Use an appropriate set of diagram to explain your answer.
Suppose that a new Central Bank’ chair is appointed and his/her approach to monetary policy is that he/she only cares about increasing employment since the inflation rate is remain low and stable. He/she wants to prioritize more on using accommodative monetary policy to promote employment. How would you expect the monetary policy curve to be affected, if at all?
Suppose a country has a money demand function (M/P)ª = kY, where k is a constant parameter. The money supply grows by 12 percent per year, and real income grows by 4 percent per year. a. What is the average inflation rate? b. How would inflation be different if real income growth were higher? Explain. c. How do you interpret the parameter k? What is its relationship to the velocity of money? d. Suppose, instead of a constant money demand function, the velocity of money in this economy was growing steadily because of financial innovation. How would that affect the inflation rate? Explain.
You are the new Governor of State Bank of Pakistan after Reza Baqir. For each of the situations listed below, decide if you would use Easy-Monetary policy or Tight-Monetary policy. a) RGDP dropped from 3 percent to 1 percent in the last year. b) The CPI and GDP deflator have risen 3 percent in the last six months. c) Commercial interest rates are rising, but the SBP has not raised rates. d) RGDP is growing steadily, and prices are rising sharply. e) The Pakistan is experiencing both high inflation and high unemployment. f) We are in a recession. Factory orders are down, and the economy appears to be slumping. g) Unemployment is low and prices are rising steadily. h) Unemployment rates are pushing 11 percent while the CPI has fallen from 8 percent to 2 percent growth. i) We are in a recession but are experiencing high inflation. j) The money supply appears to be tight, and prices are on the rise. Q-2. You are given the following information. Savings…
Which of the following statements regarding expansionary monetary policy is FALSE? a.) It increases the money supply. b.) It makes AD shift to the right. c.) It decreases consumer willingness to purchase goods, ceteris paribus. d.) It encourages job creation in the economy. Explain also
Need answers for 1, 2 and, 3
In an economy at its steady state, real GDP, Y, increases at the rate g+n, where g is the technological growth rate and n is the rate of population growth. The monetary base M is equal to nominal GDP divided by the velocity of i.e. M - PY/V where P is the price level. Thus, assuming the velocity of money is constant, the growth rate of the monetary base will be (approximately) money V ΔΜ =*+g+n M where is the inflation rate. The velocity of money is determined by the function V = V°ehi The nominal interest rate i is determined by i = r" +T, where the natural real interest rate r" is constant in steady state and taken as given. Assume that n = 0, g= 0.03, r" = 0.05, 6 =1, and V" = 20. (a) What is the seignorage as a fraction of nominal GDP, when inflation is a = 0.01? (b) What is the seignorage as a fraction of nominal GDP, when inflation is a =0.10? (c) What rate of inflation w maximizes seignorage? (d) What is the maximal seignorage as a fraction of nominal GDP?
The purpose of a restrictive monetary policy is to: Select one: a. raise investment demand. b. decrease aggregate demand. c. equate the interest rate and investment. d. supress investment demand. e. increase aggregate demand.
Can you please help with the explanation of the below? In contemporary monetary theory, we do not normally think of using a money stock to implement monetary policy. By setting m-p, the log of the real money stock, equal to money demand y-b.i where y and i are ln(GDP) and the interest rate, create a money policy reaction function. Noting that p+y is the log of nominal GDP how could you interpret m in this case so as to make your equation approximate the reality in Australia?
What is an open market operation? How can a central bank adopt an openmarket operation to increase the growth rate of her money supply? Usingrelevant Classical Theories, explain the long run effects on the inflation rateand nominal interest rate.
Q-1. You are the new Governor of State Bank of Pakistan after Reza Baqir. For each of the situations listed below, decide if you would use Easy-Monetary policy or Tight-Monetary policy. Explain each scenario within 150 words. Scenarios: RGDP dropped from 3 percent to 1 percent in the last year. Answer: The CPI and GDP deflator have risen 3 percent in the last six months. Answer: Commercial interest rates are rising, but the SBP has not raised rates. Answer: RGDP is growing steadily, and prices are rising sharply. Answer: