As a manager of a firm, you are concerned about a potential change in interest rates, which would affect money market prices. An economic report has recently highlighted the following economic conditions: (i) Saving rate is expected to increase slightly in 2021; (ii) Bank Negara Malaysia is expected to implement expansionary monetary policy in 2021 [Assuming no threat of inflation]; and (iii) Domestic economic growth rate is expected to remain stable in 2021. Assuming that money market prices are not exposed to credit risk, how will money market prices change based on the report? Explain.

As a manager of a firm, you are concerned about a potential change in interest rates, which would affect money market prices. An economic report has recently highlighted the following economic conditions: (i) Saving rate is expected to increase slightly in 2021; (ii) Bank Negara Malaysia is expected to implement expansionary monetary policy in 2021 [Assuming no threat of inflation]; and (iii) Domestic economic growth rate is expected to remain stable in 2021. Assuming that money market prices are not exposed to credit risk, how will money market prices change based on the report? Explain.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter16: Monetary Policy

Section: Chapter Questions

Problem 1SQP

See similar textbooks

Similar questions

As the treasurer of a manufacturing company, your task is to forecast the direction of interest rates. Your company plans to borrow funds and it may use the forecasting of interest rates to determine whether it should obtain a loan with a fixed or floating interest rate. The following information can be considered when assessing the future direction of interest rates:▪ Economic growth has been high over the last two years, but it is expected that it will be stagnant over the next year.▪ Inflation has been 3 percent over each of the last few years, and it is expected that it will be about the same over the next year.▪ The federal government has announced major cuts in its spending, which should have a major impact on the budget deficit.▪ The Central Bank is not expected to affect the existing supply of loanable funds over the next year.▪ The overall level of savings by households is not expected to change. (c) Assume that Singaporean interest rates have abruptly risen just as you have…
After staying virtually flat for about a year and a half, the average lending rate of banks has started to show signs of decline in April after the Bank of Ghana reduced the monetary policy rate the month before. The Summary of Economic and Financial Data (May 2020) published by the Bank of Ghana has shown that average lending rate has finally moved out of its comfort zone to a step downward. Prior to recording 22.38 percent in April, the average lending rate has since the past 17 months (December 2018) not come below 23%.How would banks benefit when interest rates decrease?
Suppose that while demand for money still depends on Y as specified, it is now no longer affected by the interest rate.
Over the past 12 years, Zambia has experienced an inflation rate of 9.8% per year. What does this suggest about the growth of Zambia's money stock according to the Quantity Theory of Money? Zambia's money stock has decreased by 9.8 percent per year over the past 12 years. Zambia's money stock has increased by 0.817 percent per year over the past 12 years. Zambia's money stock has increased by 9.8 percent per year over the past 12 years. Zambia's money stock has decreased by 0.817 percent per year over the past 12 years.
Z in the rule stands for all the factors that affect the Fed’s interest rate decision except for Y and P. Since we have taken G to be positive, the factors in Z are defined to be such that a high value of a factor makes the Fed inclined to have a high interest-rate value, other things being equal.
The actions taken by the RBA in Australia to influence interest rates, aggregate demand, economic activity, and prices in the economy is known as:
Higher potential output levels without any monetary policy intervention will lead to Multiple Choice higher real interest rates. lower real interest rates and higher inflation rates. lower real interest rates and lower inflation rates. higher real interest rates and lower inflation rates.
In October 2015, amid rising fears about the security of credit card transactions, financial institutions and businesses made the transition to using chip cards. Unlike the quick swipe of a magnetic stripe on the back of traditional credit and debit cards, chip cards have to be left inside the terminal while the embedded chip verifies the transaction. While there is no consistent method for measuring transaction speed, news agencies report average chip speeds of anywhere from 8 seconds to 13 seconds. The switch to chip readers was precarious, with many businesses taping over the chip card slots in the terminals until the kinks were worked out. Even after a year, some businesses still could not process chips and continued to utilize the magnetic stripe for transactions. Financial institutions thought the additional security benefits of the chips would overshadow the added wait times. Yet a survey conducted by Harbortouch, a leading point-of-sale company, in 2016 showed that nearly four…
“A monetarist investigator might say that the sewer flow of 6,000 gallons an hour consisted of an average of 200 gallons in the sewer at any one time with a complete turnover of the water 30 times every hour.” Interpret this statement using the equation of exchange.
Suppose the economy is experiencing a recession. If the Federal Reserve enacts expansionary monetary policy, interest rates will likely Multiple Choice rise causing investment to increase. fall causing investment to increase. fall causing investment to decrease. rise causing investment to decrease.
In the figure above, the decrease in the interest rate from i1 to i2 can be explained by a decrease in money growth. a decline in the expected price level. an increase in income. an increase in the expected price level.
Q2-20 Other things equal, if the demand for money becomes more elastic, then the LM curve will become _______.In other words, a given rise in the interest rate will, in order for money market equilibrium to be preserved, be associated with a ________ rise in income. Select one: a. less elastic / smaller b. less elastic / larger c. more elastic / smaller d. more elastic / larger