Suppose that both Friedman and Fisher are absolutely correct. Assume that over many years money supply grows at the rate of 5 percent per year and the rate of growth of real GDP is 3 percent per year. Suppose also that the real interest rate during these years is 2 percent per year. If instead money supply grew at the rate of 7 percent per year, the real interest rate would equal: 1 percent per year 2 percent per year 3 percent per year O 4 percent per year

Suppose that both Friedman and Fisher are absolutely correct. Assume that over many years money supply grows at the rate of 5 percent per year and the rate of growth of real GDP is 3 percent per year. Suppose also that the real interest rate during these years is 2 percent per year. If instead money supply grew at the rate of 7 percent per year, the real interest rate would equal: 1 percent per year 2 percent per year 3 percent per year O 4 percent 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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In this question, use the approximate formula-as given by the Fisher equation-for calculating the the real rate of interest. Assume a fixed real interest rate and everyone believes the Central Bank's forecasts. Believing that inflation will be 1% for the year, the current yield on a government bond that matures in one year is 2.9%. The Central Bank then revises its inflation forecast to 1.6% for the year. What will be the yield on government bonds maturing in one year after this revision? Round to one decimal place and do not enter the % sign. If your answer is 1.333%, enter 1.3. If your answer is 1.666%, enter 1.7. If appropriate, remember to enter the negative sign.
In the Solow growth model with population growth and technological progress, the economy experiences a 5 per cent "labour-augmenting technological progress" if: Select one: O a. the economy grows by 5 per cent while the population stays the same. O b. the economy and the population grows by 5 per cent O c. the economy does not grow while the population grows by 5 per cent. O d. the population grows by 5 per cent.
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4. Other things equal, what effect will each of the following changes independently have on the equilibrium level of real GDP in a private closed economy? LO11.5 a. A decline in the real interest rate. b. An overall decrease in the expected rate of return on investment. c. A sizable, sustained increase in stock prices.
Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy's multiplier is 4. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? In what direction and by how much will it eventually shift?
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The diagram below show the market for financial capital assuming that national income is constant at potential GDP, Y*. Real Interest Rate I EL ME 14 FIGURE 25-2 NSO I 11 12 13 NS1 1 1 Quantity of Investment and Saving ($) Refer to Figure 25-2. Suppose national saving is reflected by NS, and investment demand is reflected by lo. Now suppose the government implements a revenue-neutral tax policy that encourages investment. What is the effect on the real interest rate? Select one: O a. There is no effect on NS or ID, and the interest rate remains at i*. O b. The real interest rate rises because of the decrease in the budget surplus. O C. National saving shifts to NS₁, and the real interest rate falls to i3. O d. Investment demand shifts to 1₁D, and the real interest rate rises to i₂. O e. The real interest rate falls because of the decrease in the budget surplus.
D Question 14 Suppose for the country of Joshua-land, the annual inflation rate is 7%, the population growth is 5% per year while GDP increases by 2% per year. How long would it take for the country to double its GDP? O 7 years O 14 years 35 years O Never Question 15 For the previous question, how long would it take Joshua-land to double its GDP capita? per O 7 years O 14 years O 35 years Never Question 16 For Joshua land, how long would it take for prices to double? O 7 years O 10 years 35 years O Not enough information
Q2. d) Suppose the economy is initially in a steady state. What happens to the level of output per worker (y) and to the growth rate of aggregate capital ( K ) if the population growth (n ) decreases? Select one: O a. The level of output per worker decreases and the growth rate of aggregate capital decreases b. The level of output per worker decreases and the growth rate of aggregate capital increases O C. The level of output per worker increases and the growth rate of aggregate capital increases O d. The level of output per worker increases and the growth rate of aggregate capital decreases
ctrl tab shift ↑ caps lock REAM Stream esc Question 3 K →1 Moving to another question will save this response. fn Which of these is among the principal determinants of economic growth? O the financial system stabilization policy the government budget deficit the central bank inflation A Moving to another question will save this response. O Type here to search ? (2 2 N W S f3 # 3 alt x f4 101 LA 4 Ai E R C % LL LO 5 T 6 G f7 hp & Y 7 H fg a V B N CO 19 8