EBK MODERN PRINCIPLES OF MICROECONOMICS
EBK MODERN PRINCIPLES OF MICROECONOMICS
3rd Edition
ISBN: 8220103647816
Author: COWEN
Publisher: YUZU
Question
Book Icon
Chapter 16, Problem 1FT

Sub part (a):

To determine

The inflation in the economy.

Sub part (a):

Expert Solution
Check Mark

Answer to Problem 1FT

The inflation is 9 percent.

Explanation of Solution

It is given that the money supply in the economy increases by 10 percent. It is also given that the velocity of money is 3 percent and the real growth in the economy is 4 percent. Thus, the inflation in the economy can be calculated by subtracting the real growth rate from the summation of the increase in the money supply and velocity as follows:

Inflation=(Increase in money supply+Velocity)Real growth rate=(10+3)4=9

Thus, the inflation in the economy is 9 percent.

Economics Concept Introduction

Concept introduction:

Inflation: The inflation is the abnormal rise in the general price level in the economy.

Sub part (b):

To determine

The inflation and the real growth in the economy.

Sub part (b):

Expert Solution
Check Mark

Answer to Problem 1FT

The inflation is 6 percent and real growth rate is 4 percent.

Explanation of Solution

It is given that the money supply in the economy increases by 10 percent. It is also given that the velocity of money falls to 0 percent. The real growth in the economy is unchanged and thus, it will remain as 4 percent. Thus, the inflation in the economy can be calculated by subtracting the real growth rate from the increase in the money supply as follows:

Inflation=Increase in money supplyReal growth rate=104=6

Thus, the inflation in the economy is 6 percent and the real growth rate is 4 percent.

Economics Concept Introduction

Concept introduction:

Inflation: The inflation is the abnormal rise in the general price level in the economy.

Sub part (c):

To determine

The inflation in the economy of Pre.

Sub part (c):

Expert Solution
Check Mark

Answer to Problem 1FT

The inflation is 4 percent.

Explanation of Solution

It is given that the money supply in the economy increases by 2 percent. It is also given that the velocity of money increases by 4 percent. The real growth in the economy is given to be 2 percent.

Thus, the inflation in the economy can be calculated by subtracting the real growth rate from the sum of the increase in the money supply and the velocity of money as follows:

Inflation=(Increase in money supply+Velocity of money)Real growth rate=(2+4)2=4

Thus, the inflation in the economy is 4 percent.

Economics Concept Introduction

Concept introduction:

Inflation: The inflation is the abnormal rise in the general price level in the economy.

Sub part (d):

To determine

The inflation and the real growth in the economy of Pre.

Sub part (d):

Expert Solution
Check Mark

Answer to Problem 1FT

The inflation is 8 percent and real growth rate is 2 percent.

Explanation of Solution

It is given that the money supply in the economy increases by 2 percent. Here, there is a change in the velocity of money. The velocity of money increases by 8 percent.

The changes in the velocity of money do not affect the real growth in the economy. Thus, the real growth rate is unchanged and it will remain same as 2 percent. Therefore, the inflation in the economy can be calculated by subtracting the real growth rate from sum of the increase in the money supply and velocity as follows:

Inflation=(Increase in money supply+Velocity)Real growth rate=(2+8)2=8

Thus, the inflation in the economy is 8 percent and the real growth rate is 2 percent.

Economics Concept Introduction

Concept introduction:

Inflation: The inflation is the abnormal rise in the general price level in the economy.

Sub part (e):

To determine

The inflation in the economy of Fri.

Sub part (e):

Expert Solution
Check Mark

Answer to Problem 1FT

Inflation is 0 percent.

Explanation of Solution

The money supply growth rate in the economy is given to be 3 percent. whereas the velocity of money is given as 0 percent. The real growth rate of the economy is given to be 3 percent. Thus, the inflation rate in the economy can be calculated as follows:

Inflation=(Increase in money supply+Velocity)Real growth rate=(3+0)3=0

Thus, the inflation in the economy is 0 percent and it is the rate of inflation which is best according to Milton Friedman.

Economics Concept Introduction

Concept introduction:

Inflation: The inflation is the abnormal rise in the general price level in the economy.

Sub part (f):

To determine

The inflation and the real growth in the economy of Fri.

Sub part (f):

Expert Solution
Check Mark

Answer to Problem 1FT

The inflation is -2 percent and real growth rate is 3 percent.

Explanation of Solution

It is given that the money supply in the economy increases by only 1 percent. It is also given that the velocity of money is 0 percent. The real growth in the economy is unchanged and thus, it will remain as 3 percent. Thus, the inflation in the economy can be calculated by subtracting the real growth rate from the increase in the money supply as follows:

Inflation=Increase in money supplyReal growth rate=13=2

Thus, the inflation in the economy is -2 percent and the real growth rate is 3 percent.

Economics Concept Introduction

Concept introduction:

Inflation: The inflation is the abnormal rise in the general price level in the economy.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
I need help figuring this out. I'm pretty sure this is correct?If Zambia is open to international trade in oranges without any restrictions, it will import 180 tons of oranges.I can't figure these two out: 1) Suppose the Zambian government wants to reduce imports to exactly 60 tons of oranges to help domestic producers. A tariff of ???? per ton will achieve this.   2) A tariff set at this level would raise ????in revenue for the Zambian government.
16:10 ← BEC 3701 - Assignments-... KWAME NKRUMAH UNIVERSITY TEACHING FOR EXCELLENCE SCHOOL OF BUSINESS STUDIES DEPARTMENT OF ECONOMICS AND FINANCE ADVANCED MICRO-ECONOMICS (BEC 3701) Assignments INSTRUCTIONS: Check instructions below: LTE 1) Let u(q1,q2) = ln q₁ + q2 be the (direct) utility function, where q₁ and q2the two goods. Denote P₁ and P2 as the prices of those two goods and let M be per period money income. Derive each of the following: a) the ordinary or Marshallian demand functions q₁ = d₂ (P₁, P₂, M) for i = 1,2 [3 Marks] b) the compensated or Hicksian demand functions q₁ = h₂ (P₁, P2, M) for i = 1,2 [3 Marks] c) the Indirect Utility Function uº = v(P₁, P2, M) [3 Marks] d) the Expenditure Function E(P1, P2, U°) [3 Marks] e) Draw a diagram of the solution. There should be two graphs, one above the other; the first containing the indifference curves and budget constraint that characterize the solution to the consumer's choice problem; the second characterizing the demand…
How would you answer the question in the News Wire “Future Living Standards”? Why?
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:9780190931919
Author:NEWNAN
Publisher:Oxford University Press
Text book image
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Text book image
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Text book image
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Text book image
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education