Question 3 i) ii) iii) iv) v) Use the quantity theory of money to explain why increasing money supply need not result in inflation in an economy The nominal Gross Domestic Product of a country in the year 2015 is $25 billion. If the money supply in the economy is $20 billion, estimate the number of times money changed hands in this economy in 2015. Carefully explain why the aggregate demand curve slopes downwards from left to right Explain why planned expenditure may differ from actual expenditure in national income analysis. Use the aggregate demand and supply curves to explain stagflation O

Question 3 i) ii) iii) iv) v) Use the quantity theory of money to explain why increasing money supply need not result in inflation in an economy The nominal Gross Domestic Product of a country in the year 2015 is $25 billion. If the money supply in the economy is $20 billion, estimate the number of times money changed hands in this economy in 2015. Carefully explain why the aggregate demand curve slopes downwards from left to right Explain why planned expenditure may differ from actual expenditure in national income analysis. Use the aggregate demand and supply curves to explain stagflation O

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

2
Analyse the impact of these events on the price level and total output of an economy in the short term. If policymakers were to use monetary policy to actively stabilize the economy, in which direction should they move the money supply and interest rate and show the effects of these policies? Please discuss your answers with appropriate graphs. - (a) The government raises taxes and reduces expenditures to balance its budget. (b) Enterprises in the economy are pessimistic about the economy in the future. - (c) Foreigners increase their taste for domestically produced beef. (d) The money wage rate rises.
Question 3a) What are the functions of money?b) Draw diagrams illustrating the impact on the demand for money, the supply of money and the equilibrium interest rate, of each of the following. Explain what is going on in the money market in each case.(i) The central bank sells securities on the open market(ii) The economy grows (GDP increases) but the central bank moves tokeep interest rates constant.
5. The slope and position of the long-run aggregate supply curve Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. The level of technological knowledge The quantity of physical capital The inflation rate The price level Suppose the economy produces real GDP of $60 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 7 H a r i 18 O
Consider an economy with the following measures: (a) The nominal interest rate is 2%. The rate of growth of money supply is 5%. The velocity growth is constant. What is the growth in nominal GDP? ) In the context of introduction of robots into manufacturing, what is the difference be- (b) tween the productivity effect and the reinstatement effect? (c) thinking about the effect of higher capital income taxes. 3) Briefly describe any two of the three elasticities that Diamond and Saez mention in
P3
State whether you agree or disagree with the following statement: Explain what happens to Money Demand and Interest Rates Inflation, a rise in the price level, causes the demand for money to decline. Because inflation causes money to be worth less households desire to hold less of it. Options to choose from = Disagree, Agree, Increase, Decrease, Remain Unchanged Agree or Disagree ________ Impact on Money Demand________ Impact on Interest Rate _________
MACROECONOMIC
3. The clasSical dichotomy and the neutrality of money The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction. Ginny spends all of her money on magazines and donuts. In 2015, she earned $14.00 per hour, the price of a magazine was $7.00, and the price of a donut was $2.00. Which of the following give the nominal value of a variable? Check all that apply. The price of a donut is 0.29 magazines in 2015. O Ginny's wage is 2 magazines per hour in 2015. O The price of a donut is $2.00 in 2015. Which of the following give the real value of a variable? Check all that apply. The price of a magazine is $7.00 in 2015. O Ginny's wage is $14.00 per hour in 2015. O The price of a magazine is 3.5 donuts in 2015. Suppose that the Fed sharply increases the money supply between 2015 and 2020. In 2020, Ginny's wage has risen to $28.00 per hour. The price of a magazine is $14.00 and the price of a donut is $4.00. In…
3b Using your knowledge of money and banking, show how the equation of exchange can be used to confirm the quantity theory of money. Ensure to elaborate from your demonstration why money supply is a key driver of inflation
Problem four For this question, refer to the Bank of Ghana's Monetary Policy Committee Press Release of May 21, 2018. a) Explain the difference between monetary loosening and monetary tightening. According to the statement, the MPC reduced the monetary policy rate by 100 basis points. Does this constitute a monetary loosening or monetary tightening? Explain. b) When deciding whether to tighten or loosen monetary policy, central banks weigh the relative risks to price stability and growth. Mention two indicators that the MPC use to gauge the risk to inflation and two indicators the MPC use to gauge the risk to growth. c) Based on the information in the Press Release, in the thinking of the MPC did the risk to growth outweighed the risk to inflation or vice versa? Refer to specific points from the press release to back up your argument. d) Using the money market diagram studied in class, explain the effect of this policy measure on the real interest rate. e) In ordinary language, explain…
(c) Briefly explain the quantity theory of money and how it is related to inflation.