A common cause of falling inflation is O Weaker growth in demand than in supply for large parts of the economy O High fees and taxes O Strong wage development O Low interest rates and rising investment
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- 4. When nominal interest rates are zero, the central bank can still lower them by printing moneyand purchasing bonds from banks. This increases the supply of loanable funds and stimulateslending.5. A pro-savings policy by the US would likely reduce the US trade deficit.6. When savings equals investment, reducing savings and increasing consumption is especiallyeffective in stimulating output.Jerry James might consider buying a nominal Treasury Bond rather than Treasury Inflation Protected Securities if he expects A higher oil price to have an impact on the consumers’ cost of living B cheaper imports to have an impact on the consumers’ standard of living C the USD is expected to strengthen sharply D all of the aboveThe accompanying graph represents the market for loanable funds in the hypothetical country of Bunko. Assume the market is initially in equilibrium and inflation expectations are 2%. a. Adjust the graph to demonstrate the effects of inflation expectations increasing from 2% to 4%. Market for Loanable FundsInterest rate (%)Quantity of loanable funds (billions of $)02468101214161820012345678910DS b. What is the real interest rate after the change in inflation expectations? 3% 2% 5% 7% c. Which effect below characterizes the relationship between inflation expectations and nominal interest rates? The Leontief Paradox The Inflation effect The Fisher effect The Pigou effect
- When Japan experiences unexpected high inflation a) The bank of Japan shouldn't intervene because it won't affect the value of Japanese Yuan b) it will not redistribute wealth between lenders and borrowers c) none of the real terms of economy will be affected d) no answer aboveRobust economic growth shifts the transactions demand for money. Consequently, growth will tend to either raise our interest rates or decrease those rates. Please say which direction the rates move, and explain why?What's wrong with this way of thinking? "When the government runs a budget deficit, it simply pays its bills by printing more money. As the newly printed money works its way through the economy, it waters down the value of paper money already in circulation. Thus, it takes more money to buy things. Budget deficits are the major cause of inflation."
- in a borrowing agreement, who wins and loses when inflation is unexpectedly low? Explain how unexpectdly low inflation creates a transfer of purchasing power when money is borrowed and lent.An economy is currently experiencing inflation that exceeds the target rate set by the central bank. Answer the following questions: a) Explain the process in full detail by which the central bank can bring the inflation rate down. b) Illustrate this process from a) using the money market model, the loanable funds market model and the Aggregate Expenditure model.Given the following economic information for Country A (in RM billion): Saving (S) = –500 + 0.3Yd Investment (I) = 400 – 200r Government spending (G) = 500 Taxes (T) = 200 Nominal money supply (Ms ) = 4000 Money demand for transactions (Md t/P) = 0.2Y Money demand for speculations (Md s) = 1600 – 500r Price (P) = 2 di mana Y dan r adalah masing-masing mewakili tingkat pendapatan dan kadar bunga. where Y and r represent the levels of income and interest rate, respectively. Based on the above information, i) . Derive an expression for the IS and LM curve (four decimal point) in Y says. ii) . Calculate the equilibrium levels of income and interest rate (three decimal point).
- The ________ demand for money arises out of the need to hold money as a medium of exchange.This demand for money is a function of ________. (4 marks)A Precautionary; interest ratesB Transactions; national incomeC Speculative; interest ratesD Precautionary; national incomeThe PH debt as of today amounts 12 trillions. This balloons with an interest rate of 0.16% yearly. Suppose the government requires every earning individual to pay debt by 2030, how much of us would need to pay monthly (annual payment amortized in 12 equal payments), assuming that inflation is 3%, the interest rate is 5.6% compounded daily, and we will start the payment by the end of 2022? The Philippines is estimated to have 110 million people, with the work force around 20%. Note: Show the solution appropriately. Thankyou!Problem 1: In a situation where Area A’s population is younger and Area B’s population is generally old while putting other components constant; will the interest rates in two areas be the same or different? Discuss. PROBLEM 2: Determine how the following situations will affect the nominal interest rate levels: a. There is the anticipated higher government budget deficit. b. The expected inflation in the coming months is high. PROBLEM 8: If short-term interest rates are lower than long-term rates, why might a borrower still choose to finance business operations with long-term debts? Discuss.