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- 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) ?The real business cycle theory assumes that money wages are flexible and adjust quickly True FasleMultiple Choice Question In general, an increase in the money supply causes: deflation. an increase in aggregate demand. O no verifiable change in economic variables. O inflation.
- Kindly help me to solve below homework question : Let say after implementation of monetarty policy, Central Bank becomes more concerned about rising prices in Canada. Please describe which policy will be most effective to control the inflation? Use AD-AS diagram to support your answer.Show that if the economy’s aggregate supply curve is vertical, fluctuations in the growth of aggregate demand produce only fluctuations in inflation with no effect on output. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.One of the business cycle factsis that “the nominal money supply is a pro-cyclicaland leading variable”. Traditional Keynesian theory explains this fact with the transmissionmechanism of money. The New Classical approach uses misperceptions theory explanation. TheRBC theorist try to explain the relationship with reverse causation theory.a. According to Keynesian theory, under what conditions money would be effective to havereal effects? If money is effective to have real effects, explain the transmission mechanism thatshows the causation from money to output.b. According to the “misperceptions theory of business cycles”, how and why an increase innominal money supply causes an increase in real output in the short run by affecting thebehavior of producers? Does your answer change if the monetary shock is anticipated orunanticipated? Explain by using the IS-LM-FE and AD-AS Frameworks.c. Explain how reverse causation could occur and what is the explanation from RBC theoristthat money is…
- Strong regularities in the comovements between money supply measures and real GDP A. cannot be explained. B. were observed by Friedman and Schwartz after the 2008–2009 recession. C. were once a strong regularity in Canadian data, but is no longer. D. were observed by Friedman and Schwartz in the historical Canadian data. E. were not historically a strong regularity in Canada, but now it is.Time Period nominal interest rate percent Expected Inflation (Percent) Actual Inflation (Percent) Expected Real Interest Rate Actual Real Interest Rate Before increase in MS 10 2 2 Immediately after increase in MS 10 2 5 Suppose the nominal interest rate on savings accounts is 10% per year, and both actual and expected inflation are equal to 2%. The unanticipated change in inflation arbitrarily harms ______________. Now consider the long-run impact of the change in money growth and inflation. According to the Fisher effect, as expectations adjust to the new, higher inflation rate, the nominal interest rate will ______________ to per year.One of the business cycle factsis that “the nominal money supply is a pro-cyclical and leading variable”. Traditional Keynesian theory explains this fact with the transmission mechanism of money. The New Classical approach uses misperceptions theory explanation. The RBC theorist try to explain the relationship with reverse causation theory: c. Explain how reverse causation could occur and what is the explanation from RBC theorist that money is neutral?
- State and explain the basic equation of monetarism. What is the major cause of macroeconomic instability, as viewed by monetarists?One of the business cycle facts is that “the nominal money supply is a pro-cyclical and leading variable”. Traditional Keynesian theory explains this fact with the transmission mechanism of money. The New Classical approach uses misperceptions theory explanation. The RBC theorist try to explain the relationship with reverse causation theory. According to Keynesian theory, under what conditions money would be effective to have real effects? If money is effective to have real effects, explain the transmission mechanism that shows the causation from money to output. According to the “misperceptions theory of business cycles”, how and why an increase in nominal money supply causes an increase in real output in the short run by affecting the behavior of producers? Does your answer change if the monetary shock is anticipated or unanticipated? Explain by using the IS-LM-FE and AD-AS Frameworks. Explain how reverse causation could occur and what is the explanation from RBC theorist that money…Which of the following statements is false? a. There is no evidence of a negative correlation between central bank independenceand inflation. b. Housing starts are one of the leading indicators for the business cycle. c. In general, inflation, GDP growth, and unemployment have cyclical patterns. d. Inflation tends to be positively correlated with output gap.
