Assume that Co = 60, G = 330, T= 240, I= 100, X= 60, M = 75, b= mpc = 95 and t=1, the actual unemployment rate = 3.8%, and the natural unemployment rate is 4.7%. What will be the equilibrium value for Y? $1703.56 $1785.64 $1908.57 $2211.39 $2714.11- Given the values in the prior problems, what does Okun's Law tell us to do? O decrease Y by 2.6% O decrease Y by 2.4% O decrease Y by 1.8% decrease Y by 1.0% O decrease Y by 0.8%
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- Suppose you take out a loan at your local bank. The bank expects to earn an annual real interest rate equal to 33%. Assuming that the annualized expected rate of inflation over the life of the loan is 11%, determine the nominal interest rate that the bank will charge you.Markets are ignoring this guidance, with the start of the interest rate hiking cycle starting to be priced into the later part of 2022, just 12 months from now, and around two years before the RBA reckons it will need to move. Recall the current official cash rate is 0.1 per cent. The market is pricing in a 0.5 per cent cash rate by the middle of 2023, 1.0 per cent by the end of 2023 and with further increases through 2024.” Use the dynamic aggregate demand and aggregate supply model to explain the type and how to implement monetary policy and the effects of the monetary policy of the Reserve Bank of Australia according to the statement mentioned above.Suppose you purchase a $1,500 TIPS on January 1, 2020. The bond carries a fixed coupon rate of 5.5 percent. Over the first two years, semiannual inflation is 1.5 percent, 1.5 percent, 4 percent, and 3 percent, respectively. What is the principal at the end of month 6?
- Let's say we expect the inflation rate to be 7 percent in a year, 5 percent in two years and 3 percent thereafter. The real risk-free interest rate, r*, is constant at 2%, and the maturity risk premium on government bonds begins at zero on ultra-short-term bonds (with a maturity of several days) and rises to 0.2% on bonds with a one-year maturity. The maturity risk premium increases by 0.2% for each one-year increase in maturity, and the five-year maturity and higher maturity of government bonds are constant at the upper limit of 1.0%. 1) Calculate the interest rates of one year, two years, three years, four years, five years, ten years and twenty years of government bonds.When the inflation rate is expected to increase, the real cost of borrowing at any given interest rate; the supply of bonds _____ and the supply curve shifts to the _____. Question 1 options: declines; decreases; left declines; increases; right rises; decreases; left rises; increases; left rises; increases; right declines; increases; left rises; decreases; right declines; decreases; rightPLEASE ANSWER ALL MULTIPLE CHOICE QUESTIONS (1-4) 1. Which of the following is FALSE in regards to an overnight target rate of 3.25%? a) The Bank of Canada will pay 3% interest on Chartered Banks' deposits with the Bank of Canada. b) The Bank of Canada will charge 3.5% on loans taken by the Chartered Banks from the Bank of Canada. c) The unemployment rate MUST be equal to the overnight target rate. Hence the unemployment rate is ALSO EQUAL to 3.5%. d) The overnight target rate is the interest rate that Chartered Banks will use when borrowing and lending money to each other. e) There are NO FALSE statements. All solutions provided are correct. 2. If there is an expected increase in Canada's overnight rate, what should we expect to occur? a) The Canadian dollar will be more valuable relative to other currencies. The Canadian dollar sees an increase in demand by foreigners seeking Canadian bonds and interest bearing investments. b) Canadian exports will rise. c) The stock market will…
- 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 the investment function is I = 3,500 − 100r, where r is the real interest rate (in percent). If the nominal interest rate is 12 percent and the inflation rate is 4 percent, then total investment will be:If you were conducting an actuarial valuation for an Australian superannuation fund, what assumption for salary (wage) inflation would you use? In particular, consider a fund whose members are employed in the university sector, with a valuation date of 30 June 2022. Please justify your answer through consideration of issues such as consumer price inflation, inflation expectations (adaptive and rational), and the relationship between consumer prices and wage inflation.
- 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…True or False : Inflation is a genuine issue for retirement planning because a person age 65 will on average live between 18 and 20 years and the cost of goods can double over that period of timeAccording to the Fischer equation, if the nominal interest rate is 8% and inflation is running at 4% then the real interest rate is? 12% 8% 4% 2%