This question refers to the FundamentalEquation of Monetarism, which assumes that(a) the demand of real money balances is aknown function of (real GDP) and (nominalinterest rate); and (b) the money market isalways in equilibrium. The hypotheticaleconomy has moved from an initial situation(described in Table A) to a new situation(described in Table B).ConceptDemand for real moneyReal incomeNominal interest rateInformationMoney supplyTable A (Initial situation)ConceptDemand for real moneyReal incomeNominal interest rateInformationMoney supplyTable B (New Situation)In this economy, the price level has doubled.True or False? Explain using the dataprovided in Tables A and B.

Values of the table:Table A:Table B:*** Table values are taken from a similar question.

This question refers to the Fundamental Equation of Monetarism, which assumes that (a) the demand of real money balances is a known function of (real GDP) and (nominal interest rate); and (b) the money market is always in equilibrium. The hypothetical economy has moved from an initial situation

This question refers to the Fundamental Equation of Monetarism, which assumes that (a) the demand of real money balances is a known function of (real GDP) and (nominal interest rate); and (b) the money market is always in equilibrium. The hypothetical economy has moved from an initial situation

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 curve is upward-sloping, the technical term for the money supply is: a) Inelastic b) Unstable c) Endogenous d) Exogenous
Suppose the Federal Reserve ("the Fed") shifts to a contractionary monetary policy by selling bonds through open-market operations. Assume that this policy is unanticipated. This problem will work through the short-run effects of this move. The following graph shows the money demand and money supply curves. Show the effect of the Fed's contractionary monetary policy by shifting one or both of the curves, and ignore any potential feedback effects. As a result of the Fed's policy, the interest rate_____to____ .
Question 9
C = 50 + 0.9 · (Y – T) I = 50 – 1000 - r where Y is real output and r is the real interest rate. Government purchases and taxes are Ğ = 500, T = 500. The money market equilibrium curve-or LM curve-is where P is the price level and i is the nominal interest rate. The Central Bank (CB) is initially supplying M = 10000 units of money, and expected inflation is zº = 0.05. The long-run aggregate supply (LRAS) is Y, = 1000. Suddenly, there is a climate shock that changes the marginal propensity to consume (MPC), and the consumption function changes to C' = 50 + 0.8 · (Y – T). 1. Explain how the short-run values of (r, i) are determined before the climate shock. 2. Which, if any, of the graphs from Appendix A best depicts the short-run change in the interest rate(s) due to the climate shock? Explain. 3. Which, if any, of the graphs from Appendix B best depicts the short-run change in output and price due to the climate shock? Explain. 4. Which, if any, of the graphs from Appendix C best…
Consider a closed economy where the goods and money markets are described by the following relationships: C = 500+ 0.8(Y-T) I= 500 - 10r M/P = 0.1Y - 35r G = 800 T = 200 M = 1000 P = 2 Where C is planned consumption, I is planned investment spending, T' is government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate.
Suppose the economy is initially at full employment. Suppose further that in period 1 households experience an increase in their subjective discount factor from β to β′ > β. This type of shock is known as a natural rate shock. Characterize graphically the effect in period 1 on consumption of non-tradables, unemployment, the relative price of non-tradables, and the real wage measured in units of tradable goods under two alternative monetary policy regimes: A. A fixed exchange rate regime. B. A floating exchange rate regime in which the central bank pursues full employment and price stability.
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Those economists who believe that monetary policy is more potent than fiscal policy argue that the: A) responsiveness of money demand to the interest rate is large. B) responsiveness of money demand to the interest rate is small. C) IS curve is nearly vertical. D) LM curve is nearly horizontal.
C = 100 + 0.5 - (Y – T') I = 500 – 1000 -r where Y is real output and r is the real interest rate. Government purchases and taxes are Ğ = 500, Ť = 100. The LM (money market equilibrium) curve is Y 5i where P is the price level and i is the nominal interest rate. The Central Bank (CB) is initially supplying M = 8000 units of money, and expected inflation is a = 0. Assume that the long-run equilibrium level of output is Y = 2000. Short-run equilibrium output is initially at the same level (Y = 2000). Suddenly, news of a new world-beating super-vaccine raises expected inflation to = 0.05. Question 5 Suppose that consumers finally decide to get rid of cash altogether, and only use debit cards. Nothing else changes, and the CB doesn't do anything either. What do you think will happen to money supply M and prices P in the short and long-runs? Does this change money demand?
Assume an economy’s annual money velocity in circulation is 10. Please answer the following two question: In the view of monetarists (i.e. neoclassical view), if the annual economic growth rate is 6%, what should be the money supply increasing rate to maintain a low inflation rate as 3%? Please show equation.
In the real sector, the following data are available:Consumption Function C = 100 + 0.75YInvestment function I = 60 - 200r Meanwhile, the Monetary sector provides the following data:The amount of money in circulation = 500Money demand function for Transactions and just in case L1 = 0.2YMoney demand function for Speculation L2 = 428 - 400r Question: a. Determine the interest rate at the time of the General Equilibrium, and what is the equilibrium national income b.Prove that the General Equilibrium really exists! c. The general equilibrium conditions mentioned above can be expressed in a graph