Suppose the liquidity preference function is given by: Y - 1,000i 10 L(i,Y) = Calculate velocity for each period, using the money demand equation: V= L(i,Y) along with the following table of values. (Round your responses to two decimal places.) Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Y (in billions) 12,200 12,500 12,450 12,500 12,900 13,000 13,300 Interest rate 0.05 0.06 0.03 0.06 0.07 0.03 0.08 Velocity

Suppose the liquidity preference function is given by: Y - 1,000i 10 L(i,Y) = Calculate velocity for each period, using the money demand equation: V= L(i,Y) along with the following table of values. (Round your responses to two decimal places.) Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Y (in billions) 12,200 12,500 12,450 12,500 12,900 13,000 13,300 Interest rate 0.05 0.06 0.03 0.06 0.07 0.03 0.08 Velocity

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If the money supply is growing at a rate of 10 percent per year, real GDP (real output) is growing at a rate of 0 percent per year, and velocity is constant, what will the inflation rate be? %. (Enter your response as an integer value.) If the money supply is growing at a rate of 10 percent per year, real GDP (real output) is growing at a rate of 0 percent per year, and velocity is growing at 2 percent per year instead of remaining constant, what will the inflation rate be? %. (Enter your response as an integer value.)
How would a doubling of velocity affect Real and Nominal GDP, assuming the money supply doesn’t change
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Suppose the money demand function is Md/P = 1000+ 0.2Y - 1000 (r + π²). and Y = 2000, r = .06, π = .04, and Ms is 2600. Suppose the real interest rate rises to 0.11, and expected inflation rises to 0.09, but Y and Ms are unchanged. What would the inflation rate be? Select one: a. 4% b. 10% O c. 6% d. 8%
Q1. Suppose that money demand is given by the following function MD=$Y (0.5 - i) and that nominal GDP is given by $200. Moreover, assume that the monetary base is given by H³ = $8. It is also known that people in this economy hold all their wealth either in form of checkable deposits or in form of bonds (i.e. people hold no currency) and that banks must hold 10% of the checkable deposits as reserves. (a) Calculate the money market equilibrium using that the supply and the demand for central bank money is equal. (b) Calculate the overall supply of money. (c) What happens to the money market equilibrium if the central bank decides to increase the monetary base to Hs = $9? (d) What are the effects on the overall money supply in the economy? (Calculate the new overall supply of money and explain your result.)
If there is no speculative element in the Money Demand Function, while the other functions remain in a normal state, then find the function of the monetary sector and what the shape of the monetary sector curve looks like.
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