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- No written by hand solution The monetarist equation of exchange is: a. MQ = VP. b. VQ = MP c. MV = PQ d. V = PM divided by Q.Which of these is an alternative to monetar policy and aims to reduce inflation? a) reduce the moeny supply b) raise government purchases c) reduce taxes d) increase taxesIn an OLG model with money: Each gen picks 12 banans when young, 0 bananas when old. Central bank prints out 2 units of money, given to gen 0 for free. maxCyCo Cy= 4-vm Co= 0 + vm In equilibrium, 1 money = ______ bananas.
- The next Monetary Policy will take place after 50 days and discount rates are expected to increase by 50bps. In this case, the Money Market dealer should take exposure in which of the following and why? 1) 3-Months T-Bills 2) 3-Months TDR 3) 60-days TDRb) discuss how monetarists and keynesians view the role of government in relation to market intervention.2) b) there are a number of objectives that the monetary policy intends to achieve however, not all objectives can be achieved simultaneously. Describe three cnflicts that are normally observed.
- Assume that the reserve requirement is 5 percent. All other things beingequal, will the money supply expand more if the Fed buys $2,000 worthof bonds or if someone deposits in a bank $2,000 that she had beenhiding in her cookie jar? If one creates more, how much more does itcreate? Support your thinking.Consider an economy in which the demand for money is of the formMt =(1/v) PtYfor t = 0, 1, 2, · · · , where output is 150, the money velocity is 1.5. The money supplyis 100 for t = 0, 1. In period 2, the central bank surprises people and announcethat money supply will grow at 2 percent forever, that is, M0 = 100, M1 = 100,M2 = (1.02)M1, M3 = (1.02)M2, and so on a. What is the inflation rate in period 1, π1? What is real money balance in period 1, M1 / P1? What is the expected inflation in period 2, given the informationavailable in period 1, E1π2? b. What is the inflation rate in period 2, π2? What is real money balance inperiod 2, M2/P2? What is expected inflation in period 3, given the informationavailable in period 2, E2π3? c. 4. Compare E1π2 and π2.Suppose that a country’s inflation rate increasessharply. What happens to the inflation tax on theholders of money? Why is wealth held in savingsaccounts not subject to a change in the inflationtax? Can you think of any way in which holders ofsavings accounts are hurt by the increase in inflation?
- Explain the balance sheet channel of monetary policy influencing risk externalities as a theory for monetary transmission mechanism. - How does this describe the non-neutrality of money? - make a sketch/outline of the theory. - How does this channel connect to other non-neutrality theorie s?Explain and illustratethe deposit creationprocess throughT-accountsSuppose a researcher discovers that a measure of thetotal amount of debt in the U.S. economy over thepast 20 years was a better predictor of inflation andthe business cycle than M1 or M2. Does this discoverymean that we should define money as equal to the totalamount of debt in the economy?
