Suppose, the immediate response to an announcement by the Federal Reserve is investors in Treasury securities believe that the Fed will be increasing interest rates exactly as they expected to contain inflationary pressures. Everything else held constant, this in long-term Treasury in long-term Treasury would cause prices and yields. Select one: А. an increase; an increase В. a decrease; a decrease С. a decrease; an increase D. no change; no change Е. an increase; a decrease

Suppose, the immediate response to an announcement by the Federal Reserve is investors in Treasury securities believe that the Fed will be increasing interest rates exactly as they expected to contain inflationary pressures. Everything else held constant, this in long-term Treasury in long-term Treasury would cause prices and yields. Select one: А. an increase; an increase В. a decrease; a decrease С. a decrease; an increase D. no change; no change Е. an increase; a decrease

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. Suppose that people expect inflation to equal 3 percent, but in fact prices rise by 5 percent. Indicate whether this unexpected higher rate of inflation would help or hurt each of the following groups. a homeowner with a fixed-rate mortgage. a union worker with a fixed labor contract a company that has invested some of its endowment in a government bonds which pay a fixed rate of return. 5. Indicate how each of the following events would affect the aggregate demand AD curve: a short-run decrease in the price level an increase in consumer confidence on the price level and real GDP an increase in government purchases
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1. Explain the effect of DEFLATION on the equilibrium interest rates using: а) Loanable Funds Theory. b) Keynes' Liquidity Preference Theory.
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5) Suppose that: Mp = 800 + 0.2Y – 5000(r + n) P M5 = 1000 + 0.1Y – 3000n a. If n = 0.1 ;r = 0.1 ;Y = 2000, in equilibrium, what is the price level? b. What is the velocity? (using the same parameters as in a.) c. If output increases so that Y = 3000, what is the price level? d. What is the velocity? What is the change rate of the velocity? What does this number mean? e. Now, if a = 0.1 ;Y = 2000; and price level is forced to be P = 6, what is the equilibrium interest rate? f. What is now the velocity?
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5-) Question : Variables expressed in terms of are called .. Variables ..... Please select one or more option: a) physcial units / endogenous b) exogenous units / real c) money / nominal d) physical units/ real e) endogenous units / nominal 6-) Question: . implies that an increase in . will increase umw m m a) neutrality of money / inflation / real interest rates b) inflation / prices / both saving and investment c) neutrality of money / the money supply / nominal interest rates d) inflation / prices / real GDP e) neutrality of money / the money supply / real interest rates
Suppose that conditions in the economy are such that the after-tax expected real interest rate is described by the equationRa = a X gWhere a is a number that depends on how people value their consumption in one period compared with another period, and g is the growth rate of the economy. The a equals 1 when people prefer consumption to be balanced, with the same amount of consumption each period; a may be bigger than the one when people prefer consumption today over consumption in the future, with a being larger and larger the more impatient people are:D - Beginning with the situation in part a, if the expected inflation rate declings to 0.01, what are the new values of the equilibrium nominal interest rate and the before tax expected real interest rate?E - From these results, what general conclusions can you draw about the relationship between the nominal interest rate and the rate of economic growth, the tax rate, and the inflation rate? what about the relationship between the before…
2. Suppose that a representative household is part of a two-period economy, with a commodity and a credit market. He holds no initial assets (bonds or money) and no final assets, by the end of the second period. Assume that, for some exogenous reason, the price level decreases at the beginning of period one, before consumption and labor effort decisions are made. This drop is expected to last forever. a) Do you expect this change to yield any real effect? More exactly, are real aggregate output demand (through consumption) or supply (through labor effort) affected? Explain why or why not. b) Imagine now that this household leaves a bequest to the next generation. As a result, a decision is made to hold a fixed real value of bonds (b2/P) by the end of the second period. These will be paid to the children of the household. Under these conditions, will there be any impact from the price level change over the individual consumption and labor effort choices of the representative household…
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estion 5 2 Which statement is CORRECT? By keeping actual output approximately equal to potential output, a nation's macro-policy makers risk producing employment problems. By keeping actual output approximately equal to potential output, a nation's macro-policy makers risk producing inflation problems. By keeping actual output above potential output, a nation's macro-policy makers can achieve the goal of high output. By keeping actual output approximately equal to potential output, a nation's macro-policy makers can achieve the goal of high output. O By keeping actual growth rate of output at its maximum pace, a nation's macro-policy makers can achieve the goal of high output. A Moving to the next question prevents changes to this answer. 4 % 5 JUL 20 tv 6 MacBook Pro & 7 *00 8 Nc 9