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An inflation rate targeting rule
a. means that the inflation rate must exceed 5 percent in order for the rule to be effective.
b. reduces uncertainty about
c. has been adopted by the SARB in response to the financial crisis of 2008-2009.
d. will not work if the SARB continues to sue open market operations.
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Solved in 3 steps
- The Canadian govt can reduce national dent by an interest and inflation policy which keeps the rate of inflation above the rate of interest. True/False/Uncertain.Gina loans George $1,000. George agrees to pay her $1,100 next year. They both expect an inflation rate of 4 percent. At the end of the year, the inflation rate turns out to be 5 percent. This unexpected change is Select one: a. good for Gina but bad for George. b. bad for both Gina and George. c. irrelevant, a deal is a deal. d. good for both George and Gina. e. good for George but bad for Gina."Inflation tax" means that: Select one: a. as the price level rises, taxpayers are pushed into higher tax brackets. b. as the price level rises, the real value of money held by the public decreases. c. as taxes increase, the rate of inflation also increases. d. in a hyperinflation, the chief source of tax revenue is often the printing of money.
- 43. Different countries experience different types of inflation. Which type of inflation is mostly associated with a growing economy due to increasing purchasing power and profit motive? a. Built in and cost push b. None of the choices is correct c. Demand pull and built in d. Cost push and demand pullPlease explain and answer all this is my last question. Tick the correct alternative(s): Choose one or more: a. Inflation is an economic maladjustment that is reflected in a process of generalized price increases for products and services.services and affects each sector of the economy differently.b. With inflation, your money loses value because you need more to buy the same basket.c. The most recommended method for analyzing problems involving Average Rate of Attractiveness varying over time is Net Present Value (NPV).d. The inflation index is nothing more than a relationship between price indexes at two different time points, and you should choose a price index that adequately reflects the general behavior of the economy.e. Inflation complicates financial market operations by introducing an uncertain forecast component.The Bangladesh Bank has created additional money worth Tk70,794 crore through various refinance schemes and easing regulatory requirements after the Covid-19 outbreak in March for stimulating demand to revive the declining economy.” 1. What type of inflation, demand-induced or supply-induced, continued or one-shot inflation?[ Draw a relevant diagram ] 2. How the expected inflation work? [ Draw a relevant diagram ]
- The main problem of a government constantly using monetary policy to reduce unemployment, as guided bythe Phillips curve is:(a) people eventually update their expectations, shifting the Phillips curve to the right, worsening theinflation-unemployment trade-off(b) people increase their demand for money very fast, rendering monetary policy more difficult(c) eventually hitting the zero lower bound, where monetary policy is not effective anymore(d) being exposed to a negative supply shock(e) none of the above is a problemThe price-wage spiral is associated with which type of inflation? a. Cost push b. Demand pull c. Built in d. ChronicRecently the economic conditions of the country have been weakened. Even though inflation has not increased in the last year. Price of crude oil on the international market has increased by 15% last month. As a measure in controlling inflation in the country, the Monetary Policy Committee (MPC) of the Bank of Ghana has decided to restrict the supply of money and increase the target policy rate by 100 basis points (1%) Required:a. As a finance student, do you support the decision made by the monetary committee? Explain (not exceeding 6 lines of explanation).b. Explain how prices of debt securities would change in response to this policy? (not exceeding 6 lines of explanation) c. Assume the Monetary Policy Committee decides to reduce the target policy rate by 1.5% today and this decision is not backed by any financial market expectations. Will this change in policy directive affect yields paid by firms when they issue corporate bonds? Explain your answer.d. In the last month, the 91day…
- Money demand equation for a country is given by the equation (MP)d=e−λ(πe+r)+αY where πe is expected inflation, r is the real interest rate and Y is income. We assume that expected inflation equals actual inflation and also r and Y are considered as constant. Find the optimal level of inflation (π∗)which maximizes seigniorage revenue (S) ?Will the following lead to cost-push or demand-pull inflation? (a) The discovery of a large and rich vein of gold in the banks of Lagan(b) More militancy in wage demands by trades unions(c) A fall in output as a result of a prolonged lockdown of business while the government pays for salaries of furloughed workers(d) A higher tax on microchips(e) Increasing industrial concentration leading to oligopolistic industrial structures Give proper explanations.Statement 1:If inflation rate is within the target, policy change in necessary. Statement 2: If inflation rate differs from the target, policy change is necessary. *a. both statements are falseb. only statement 2 is correctc. none of the choicesd. both statements are correcte. only statement 1 is correct
