Assume that the money demand function is (M/P)^d= 2200 – 20000i, where i is the interest rate. The real money supply is 1000. The equilibrium interest rate is: a. 2% b. 4% C. 6% d. 8% e. none of the aboves
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- Desired consumption is C^d = 100 + 0.8Y - 500r - 0.5G, and desired investment is I^d = 100 - 500r. Real money demand is (M^d)/P = Y - 2000i. Other variables are πe = 0.05, G = 200, = 1000, and M = 2100. Find the equilibrium values of the real interest rate, consumption, investment, and the price level.Q36 The LM curve is flatter if the interest elasticity of demand for money- Select one: a. both may be possible b. none of the given options c. high d. lowFill-in the correct answer. p i π rr Qtr 1 0.05 0.06 0.03 Qtr 2 0.03 0.07 0.03 Qtr 3 0.02 0.08 0.03 Qtr 4 0.04 0.05 0.03 "_________" Calculate the annual realized real rate of interest."_________" Find the rate of risk."_________" Find the inflation-adjusted principal.
- Suppose that the nominal interest rate is zero; that is, R = 0 . (a) What is the equilibrium quantity of credit card balances? (b) In what sense does the economy run more efficiently with R = 0 than with R > 0 ? (c) Explain your results in parts (a) and (b). Discuss the realism of these predictions.Based on the projections of the repurchase rate in the extract above.Explain, with the aid of a graph, the impact of a cut in the interest rate on thedemand for money.Desired consumption is Cd = 2000 + 0.9Y - 100,000r - G, and desired investment is I d = 1000 - 45,000r. Real money demand is Md/P =Y - 6000i. Other variables are πe = 0.03, G = 500, Y = 1000, and M = 2100. Required (a.) Find the equilibrium values of the real interest rate, consumption, investment, and the price level. (b.) Suppose government purchases decline to 450. What happens to the variables listed in part (a)? (c.) Suppose government purchases rise to 650. What happens to the variables listed in part (a)? (d.) What feature in this example leads to the result that you don’t need to know the amount of taxes collected by the government to find the equilibrium?
- Inflation in the Philippines this year has surged to 4.9% in 2022, exceeding the inflationtarget band set by the Bangko Sentral ng Pilipinas. In response, the BSP might raise theirkey real interest rate soon, which will in turn affect loaning and lending rates in thecountry. In response to these conditions, firms and investors are growing anxious and assuch, are planning on pulling back on their investments. Given all the information above, illustrate and explain the effects of the decrease ininvestment on the economy. Make sure to cover the following: shifts (if any) in theaggregate expenditure curve, the change in equilibrium output (i.e. identify and comparethe old and new level of equilibrium output in the graph, and the multiplier effect.Suppose that the real money demand function is L(Y,r+πe)=0.3Y÷ (r+πe) Where Y is real output, r is the real interest rate, and πe is the expected rate of inflation. Real output is constant over time at Y = 1500. The real interest rate is fixed in the goods market at r = 0.5 per year. Suppose that the nominal money supply is growing at the rate of 10% per year and that this growth rate is expected to persist for ever. Currently, the nominal money supply is M = 400. What are the values of the real money supply and the current price level? (Hint: What is the value of the expected inflation rate that enters the money demand function?). Suppose that the nominal money supply is M = 400. The Bank of Namibia announces that from now on the nominal money supply will grow at the rate of 5% per year. If everyone believes this announcement, and if all markets are in equilibrium, what are the values of real money supply and the current price level? Explain the effects on the…Explain whether each of the following statements is true or false : A). An increase in the ratio of cash holdings to deposits raises the money multiplier. B). If real interest rates become negative, the neoclassical model of investment predicts there is now no limit to how much capital rms want to purchase.
- Please explain the correct answer(s). An investor wants to be able to buy 4 percent more goods and services in the future in order to induce her to invest today. During the investment period, prices are expected to rise by 2 percent. Which statement(s) below is/are true? 1.I. 4 percent is the desired real risk-free interest rate. 2.II. 6 percent is the approximate nominal rate of interest required. 3.III. 2 percent is the expected inflation rate over the period. A) I only B) II only C) III only D) I and II only E) I, II, and IIIAs 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…Suppose a country has a money demand function (M/P)d=kY, where k is a constant parameter. The money supply grows by 12 percent per year, and real income grows by 4 percent per year. What is the average inflation rate?
