If the growth rate of real GDP is 1%, the rate of inflation is 5%, and the grow supply is 6%, then, according to the quantity theory of money, what is the gra GDP? 11% 12% 5% 6% 7% Ⓒ4%
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- If the velocity of circulation is growing at 1 percent a year, the real inter- est rate is 2 percent a year, the nominal interest rate is 7 percent a year, and the growth rate of real GDP is 3 percent a year, calculate the inflation rate, the growth rate of money, and the growth rate of nominal GDP.Consider two countries, A and B. In A, new technologies (e.g., mobile payment apps and cryptocurrencies) have been enthusiastically adopted by the population, thereby reducing the proportion ofincome that is held as real money balances. Over this period, no such changes occurred in B. Ifthe rate of money growth and the growth rate of real GDP were the same in A and B over thisperiod, then how would the rate of inflation differ between the two countries?Suppose that an economy has a constant nominal money supply, a constant level of real output Y = 1500, and a constant real interest rate r = 0.05, and it’s expected rate of inflation is 2%, i.e, πe = .02. Suppose that the income elasticity of money demand is ηY = 0.5 and the interest elasticity of demand ηi = –0.2. (a) Suppose that Y decreases to 1425, r remains constant at 0.05 and there is no change in the expected rate of inflation. What is the percentage change in the equilibrium price level? (b) Suppose that r increases to 0.06 and Y remains at 1500. Assuming that expected inflation remains at πe = .02, what is the percentage change in the equilibrium price level? (c) Suppose that r increases to 0.06. Assuming that πe = .02, what would real output have to be for the equilibrium price level to remain at its initial value?
- Suppose that on January 1, 2023, the price of a one-year Treasury bill with a face value of $1,000 is $940.01. Investors expect that the inflation rate will be 3% during , but at the end of the year, the inflation rate turns out to have been 2%. he nominal interest rate on the bill (measured as the yield to maturity) is enter your response here %. (Round your response to two decimal places.)Assume that next year’s wage rate will be 3 percent higher than this year’s because of inflationary expectations. The actual inflation rate is 4 percent. At the beginning of next year, will the real wage be higher, lower, or the same as today? Explain. Assume that Mark gets a fixed-rate loan from a bank when the expected inflation rate is 3 percent. If the actual inflation rate turns out to be 4 percent, who benefits from the unexpected inflation: Mark, the bank, neither, or both? Explain. How does each of the following changes affect the real gross domestic product and price level of an open economy in the short run? Explain. The depreciation of the country’s currency in the foreign exchange market.a) If growth rate of real GDP is 8%, and velocity growth rate is 4% . If central bank targets to have 6% inflation rate ,what should be the growth rate of money supply according to equation of exchange? b) Suppose there are two villagers, Salva and Angel. Both want to borrow money from another villager named Raquel at 10% interest rate. Angel is determined to pay the loan in due time but Salva does not have that kind of intention (loan defaulter always) but does not express it to Raquel. Both of the borrowers are unknown to Raquel and she does not have much information about them. Their true intentions are totally unknown to lender Raquel.Therefore, it is quite impossible for Raquel to distinguish who might be the defaulter. Can you write down the name of this problem? Is there any possible solution to find out the right person? How?
- If l = 0, what does this imply about the relationshipbetween the nominal interest rate and the inflationrate?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…N6 How could Venezuela's inflationary problem be resolved once and for all? Consider and remark on the the following solutions, considering what they involve and how effective they might be. a. A full official dollarization b. Adoption of BitCoin or nother crypto currency such as the Petrolo. c. Legislation mandating a balanced budget approved by the Congress and signed into law by the President.
- 1-)What is the difference between a real rate and a nominal rate? Say you got a raise of 10% of your salary but inflation increased by 15%, what is your real percent increase in salary? How should we use this in every day life to make changes that will make us wealthier over time. 2-) How can we use the Aggregate Supply and Demand Model to help us understand what the government is doing in the current Covid19 economic crisis? 3-) What is the basic difference between Fiscal and Monetary Policy, how are they used during recessions? 4-)Suppose the economywide demand for money is given by: M = P(0.2Y – 25,000i). The price level Pequals 3, and real output Y equals 8,000. At what value should the Fed set the nominal money supply if it wants to set the nominal interestrate at 2 percent?Assume that the demand for real money balance (M / P) is M / P = 0.8Y – 200i, where Y is national income, and i is the nominal interest rate (in percent). The real interest rate r is fixed at 5 percent by the investment and saving functions. The expected inflation rate equals the rate of nominal money growth. If Y is 2,500, P is 1.2, and the growth rate of nominal money is 2 percent, what must i and M be? Show all your work, show formula used and explain why.