> A Moving to another question will save this response. Question 18 Velocity of money depends on all of the following, except: O Customs O Stability of money as store of value O Inflation Rate Q Wage Rate bike 2.jpg 101°F Sunny bike.jpg 1 OL bike 2
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- 10 - Which of the following depends on the demand for money, which we say just in case and for this purpose?A) IncomeB) to KeynesC) to the economyD) to interestE) InvestmentThe next Monetary Policy will take place after 50 days and discount rates are expected to increase by 50bps. In this case, the Money Market dealer should take exposure in which of the following and why? 1) 3-Months T-Bills 2) 3-Months TDR 3) 60-days TDRConsider an economy in which the demand for money is of the formMt =(1/v) PtYfor t = 0, 1, 2, · · · , where output is 150, the money velocity is 1.5. The money supplyis 100 for t = 0, 1. In period 2, the central bank surprises people and announcethat money supply will grow at 2 percent forever, that is, M0 = 100, M1 = 100,M2 = (1.02)M1, M3 = (1.02)M2, and so on a. What is the inflation rate in period 1, π1? What is real money balance in period 1, M1 / P1? What is the expected inflation in period 2, given the informationavailable in period 1, E1π2? b. What is the inflation rate in period 2, π2? What is real money balance inperiod 2, M2/P2? What is expected inflation in period 3, given the informationavailable in period 2, E2π3? c. 4. Compare E1π2 and π2.
- Suppose a given country experienced low and stableinflation rates for quite some time, but then inflation picked up and over the past decade had beenrelatively high and quite unpredictable. Explain howthis new inflationary environment would affect thedemand for money according to portfolio theories ofmoney demand. What would happen if the governmentdecided to issue inflation-protected securities?30 - The demand for money, which we say just in case, depends on which of the following?A) For transaction purposesB) InvestmentC) to speculateD) IncomeE) to interestProblem a)Discuss the main functions of money b)Consider that the Ghanaian economy is a Small and close, which ischaracterised by the following.AD=C+I+G+NXC=a+bY*Y*=disposalincomeT=T 0I=I 0G=G0Md/P=Ld(Y,i)Ms=money supply, which is given.AD=Aggregate demand, C=consumption, G=Government expenditure, T=Tax, P= Price level, I=Investment, NX=Net exportsa)Consider an increase in Government spending ∆ > .Assume for now thatboth price and expected price are fixed. Also assume that government doesnot implement any other policy than the increase in Government spending.What is the effect of this policy on the goods market? b)What is the effect on equilibriumin the money market? Present your answer ina well-labelled diagram, showing both money supply and demand before thepolicy was implemented, and that after the policy was implemented in thesame graph. c)Solve for equilibrium in the goods market.d)Suppose the policy change is rather an increase in real money supply not a decrease in government…
- 2. Suppose that Md = –80i + 0.7Y and that BSP fixes Ms at Php50 B and the nationalincome is to be achieved at P80B.A. Determine the equilibrium interest rate and equilibrium quantity of money that isdesirable so as not to cause any surplus or shortage of money. Show supportingcalculation.B. Illustrate in a graph the money demand and supply and highlight the equilibriumpoint.Calculate what happens to nominal GDP if velocityremains constant at 4 and the money supply increasesfrom $250 billion to $375 billiona) Assume that the nominal return on U.S. government T-bills was 10% during 2002, when the rate of inflation was 6%. The real risk-free rate of return on theseT-bills was: b) When individuals believe they have sufficient income and assets to cover their expenses while maintaining a reserve for uncertainties, they are most likely in the phase of the investment life cycle. gifting B. consolidation C. accumulation D. spending c) Find the duration of a 3-year bond with annual coupon payments of $80 and a par value of $1,000. The current market price of the bond is $950.25. If the YTM of the bond dropped by 1%, what would happen to the bond price?
- (M/P)d = 1,000 − 100r,M = 1000P = 2.a) Graph the supply and demand for real money balances.b) What is the equilibrium interest rate?c) Assume that the price level is fixed. What happens to the equilibrium interest rate if the supply ofmoney is raised from 1,000 to 1,200?d) If the Central Bank wishes to raise the interest rate to 7 percent, what money supply should it set?Q. The equation for the velocity of money is defined as: a. MV=PR b. MV=PT c. MV=MV d. MV=PY e. None of the above. Kindly just mark the correct option please14. If the expected inflation rate is 5% and negotiators agree that the real wages should rise by 7%, the two sideswill agree to an increase in the money wage ofA 2%B 5 %C 7 %D 12%