If the nominal money supply is 12,000, real output is 15,000, the real interest rate is .03, and the expected inflation rate is .03, then the price level is Select one: a. 3/4 O b. 1 c. 4/3 d. 2
Q: c) A certain brand of vacuum cleaners can be purchased from several local stores as well as from…
A: Economic profit is the gap between the total revenue of the firm and its total economic costs that…
Q: Assume that you are an economic consultant. The firm that hired you has provided the information…
A: In perfect competition, There exists a large no. of buyers and sellers. The firm maximize it's…
Q: 1. Assume you are the Project Manager of a construction company going to prepare the tender for a…
A: The term "market condition" describes the status of the market at a specific time, including the…
Q: (11) The fiscal balance is the difference between exports and imports. government expenditure and…
A: “Since you have posted multiple questions, we will provide the solution only to the first three…
Q: The market wage in industries A and B are $10/hour. The government raises the minimum wage from…
A: Given information: The market wage in industries A and B is $10 per hour. The government raises the…
Q: 1. Consider the following game, which has been loosely based on the trust models studied in class.…
A: Given pay-off matrix Player 2 L C R Player 1 T 5,5 1,7 0,0 M 7,1 4,4 0,0 B 0,0…
Q: You are given the following information for a producer of organic grommets in a perfectly…
A: In economics, total revenue refers to the total amount of money earned by a firm from selling its…
Q: Part a: Find the Nash equilibrium
A: Nash Equilibrium refers to the strategy which is best response to the given strategy of the rival…
Q: 2. Suppose the central bank of a country is worried about the economy overheating so it enacts a…
A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: 5. Exercise 10.7 Royersford Knitting Mills, Ltd., sells a line of women's knit underwear. The firm…
A: Price elasticity of demand measures the responsiveness of quantity demanded to changes in price
Q: 1. "Taxes are necessary evil". Based on what we discussed in class, discuss and argue why this is…
A: Governments impose taxes as mandatory payments or charges on citizens, companies, and other…
Q: "A taxi company currently has nine cabs in its fleet, and its total daily cost is $4,000. If the…
A: When the company revenue is more than the cost , it means it will be profitable business , if…
Q: $ per unit $20 $10 5 10 15 20 25 30 MC ATC MR AVC Output (q) The graph above shows a firm's Marginal…
A: A firm is a price taker when it cannot affect the market price and accepts the market price as…
Q: 1. A group of college friends decide to start their own bank, LSU Community Bank, in rural…
A: a). LSU Community Bank's balance sheet: Assets Amount (in millions) Loans $90…
Q: Draw the correctly labeled graph that shows the impact of a decrease in the IOR rate on the quantity…
A: A recession is characterised by a significant slowdown or contraction of the economy. A recession is…
Q: Appledale Dairy is considering upgrading an old ice-cream maker. Moderate upgrading costs $7050 now…
A: Present value is the value of investment in today's dollar. Future value is the value of investment…
Q: b. Compare the buyers' marginal benefit and the seller's marginal cost at the firm's profit…
A: When the market becomes less competitive, existing firms experience an increase in monopoly power. A…
Q: Give typing answer with explanation and conclusion How might the global financial crisis create…
A: Introduction Since the pandemic emergency arrived, there has been a 90 trillion USD loss to the…
Q: Use the AS-AD model to describe the crowding-out effect of private investment occurring when the…
A: a). When the government decreases taxation, it will increase disposable income, which will increase…
Q: Show the long-run equilibrium by shifting the appropriate curve or curves and/or placing the point…
A: In macroeconomics, the money supply refers to the total volume of cash held by the general…
Q: two theories of education: human capital and signaling. Economists have estimated fairly large…
A: The term sheepskin effect describes the fact that earning more wages after obtaining a college…
Q: what is the opportunity cost of a pound of apples what is the opportunity cost of a pound of ban
A: Opportunity cost is the cost of producing one good in terms of other. Opportunity cost shows the…
Q: When demand is perfect elastic.. -the demand curve is vertical -we produce a lot more for a…
A: Price elasticity of demand measures the responsiveness of change in quantity demanded to change in…
Q: new keynesian models assume that the business cycle fluctuations are driven by the aggregate demand…
A: Keynesian economics is a macroeconomic theory that focuses on the role of aggregate demand in…
Q: 2. Which of the following is a characteristic feature of public goods? A. We need to pay to use…
A: The goods which are non excludable and non rival are considered to be as public goods.
Q: 2. What is Consumption Smoothing? How does Insurance help people Smooth Consumption?
A: Consumption smoothing refers to the process of maintaining a stable level of consumption over time,…
Q: c. Shift the appropriate curve to show the long-run adjustment. Then place the points for short-run…
A: In this case, we have to discuss about Phillips curve. This Philips curve indicates a strong…
Q: A. Calculate an expression for the IS, MP and AD curves ( r= ?, IS Y= ?, AD Y=?) B. Let AS curve be…
A: A. To calculate the IS, MP,and AD curves , we need to use the following equations: IS curve…
Q: Suppose Kenji runs a small business that manufactures shirts. Assume that the market for shirts is a…
A: Marginal revenue is calculated as the ratio of change in total revenue to change in quantity.…
Q: Consider an economy with 2 goods and 2 agents. The Örst agent has the utility function, u (x1; x2) =…
A: The social planner's problem is to allocate the resources of the economy to maximize social welfare…
Q: If velocity (V) and aggregate output (Y) remain constant at $4 and $1.250 billion, respectively,…
A: Quantity theory of money shows the relationship between the money supply, velocity, price level and…
Q: Suppose that Good X is sold in a perfectly competitive market. The supply curve is given by…
A: Deadweight loss is the decrease in total surplus resulting when socially efficient quantity is not…
Q: Mention three monetary policy limitations
A: Monetary policy is a macroeconomic tool used by central banks to manage the supply and demand of…
Q: When the public debt is held by foreigners, it is not a real burden on real domestic output.…
A: Public debt is the total amount of money owed by a government to its creditors. It is the…
Q: Suppose a country has a fixed exchange rate. FX speculators notice that the country’s government is…
A: Under a fixed exchange rate system, the central bank of a country intervenes in the foreign exchange…
Q: 1.F. Explain the Taylor rule (be sure to provide the equation and tell what the central bank will…
A: Central bank policy refers to the actions and decisions taken by a country's central bank to manage…
Q: In your opinion which economy is better. A closed economy or an open economy. Explain?
A: A closed economy is one that does not engage in international trade and therefore does not interact…
Q: A new deposit of $3,000 is made in the banking system with the reserve-deposit ratio r = 15% and the…
A: Total deposits created refers to the total amount of new deposits that are created in the banking…
Q: Part 1 Colonel Forbin is about to open a unique bookstore, The Helping Friendly Bookstore. Colonel…
A: Since, Colonel Forbin is about to open a unique bookstore, The Helping Friendly Bookstore. So, we…
Q: Tully is a graduating high school senior deciding between three alternative combinations of…
A: To determine which option is the best for Tully, we need to calculate the present value of each…
Q: 3. Productivity and growth policies Consider a hypothetical small island nation in which the only…
A: Productivity refers to how much output increases when labor hours are increased. It is the ratio of…
Q: Derive a bid-rent function for a "typical" firm. Draw a graph of the bid-rent function that is…
A: Bid rent is a concept in urban economics that refers to the maximum amount of money a person or…
Q: 4. Consider a variant on the Aghion and Tirole (1997) model. Poppy, the principal, and Aiden, the…
A: Poppy can put effort into discovering a new project. Poppy can put an effort into E, and bear the…
Q: 4. Min King, the world traveler, says if the airlines want to attract more passengers, they should…
A: Elasticity of demand describes how much a product or service's quantity desired changes in reaction…
Q: > > > Watch the Video then answer the following questions: ECHOS How We Fight Against Monopolies…
A: Anti-trust law refers to a set of laws and regulations that aim to promote fair competition and…
Q: Youngstown-Warren Regional Airport (YNG) has had a difficult time securing passenger service from a…
A: A company's economic profit is calculated by deducting its explicit and hidden costs from its…
Q: B C O Hi K 1 G₁ 1 I 1 1 ELM MR Quantity Demand efer to the diagram. At the profit-maximizing level…
A: Marginal Revenue lies below the demand curve which implies the firm has to lower the price to sell…
Q: Read “YOU’RE THE ECONOMIST: Recession Takes a Bite Out of Gator Profits” in Chapter 8. Assuming…
A: Perfect competition: A firm in the competitive market is a price taker because it has large number…
Q: Consider an economy with two goods, consumption c and leisure 1, and a representative consumer. The…
A: Given information Considering an economy with two goods: Consumption, c Leisure, l A consumer's…
Q: What is the implication of a new technological change in the production on consumer.
A: Technological change is the creation and application of new tools, methods, processes, or…
RM3.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Please consider the real balance demand below.ln m = α0 + α1 ln y + α2 ln Ra) What is the economic meaning of α1 and α2 ? Prove your claim for α1.b) Assume that α1 = 1.0 and α2 = -0.4. Interpret α1 and α2.c) Solve the real balance demand for R using the numerical values in (b) above.d) Consider R = r = 0.04 and y / m = 5 for the zero inflation rate. Assuming that the real interest rate r is constant and 4%, calculate the inflation rate for the nominal interest rate R = 25%.e) Using the values in (b) and (d) above, calculate the inflation welfare cost as a percentage of total output y.f) explain intuitively the economic logic behind the calculation method in (e) above.4. Justin's demand for good 1 is given by the formula: x1d(p1,p2,I)=2⋅I/4⋅p1+6⋅p2, Suppose... p1=$7/unit p2=$7/unit and I=$266 By how much will Justin's consumption of good 1 change if all prices AND his income were to double? (When all prices and income increase by the same percent, as is the case here, this is called "pure inflation"). (Note: The numbers may change between questions, so read carefully) (Note: The answer may not be a whole number, so round to the nearest hundredth)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…
- 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?u are considering the choice between investing $50,000 in a conventional 1-year bank CD offering an interest rate of 5% and a 1-year Inflation-Plus CD offering 1.5% per year plus the rate of inflation. Which is the safer investment? Can you tell which offers the higher expected return? If you expect the rate of inflation to be 3% over the next year, which is the better investment? Why? If we observe a risk-free nominal interest rate of 5% per year and a risk-free real rate of 1.5% on inflation-indexed bonds, can we infer that the market's expected rate of inflation is 3.5% per year?There are two countries in the world, A and B. Suppose the central bank in country A has an annual inflation target pai = 0.02 while the central bank in country B has anannual inflation target pai = 0.03. In the long run, we would expect the nominalexchange rate of country A to appreciate against country B at a rate of about 1% per year.True or False? Explain.
- Assume the expected after-tax real interest rate is 1% and that the nominal interest rate is 4% .Suppose that the actual inflation rate turns out to be 4% as well. What is the realized after -tax real interest.?1. If the present inflation rate is 5% and the existing nominal interest rate is 10%, holding other things constant, what do you expect to happen (according to the Fisher effect) to the nominal interest rate if inflation falls to 2%? 2. If the quantity of money increases by 10%, while money velocity and production stay constant, what has to happen to the price level according to the quantity equation?In what situation would the expected real interest rate be negative? O The nominal interest rate is less than the expected inflation rate. O The nominal interest rate is greater than the real interest rate. O The expected inflation rate is greater than the actual inflation rate. O The expected real interest is greater than the expected inflation rate. O The actual inflation rate is greater than the nominal interest rate. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.
- 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?After graduating from college in 2020, Art Major's starting salary is $40757.0040757.00. Suppose Art Major has a cost of living adjustment (COLA) clause, or an escalator clause, in his labor contract so that he will be able to maintain this same level of purchasing power in real terms in 2021 and 2022. Using the information in the table, how much will Art Major earn in 2021 and 2022 if his salary keeps up with inflation? Round your answers to the nearest dollar. Year CPI 2020 101.77 2021 106.80 2022 109.35 What is Art Major's salary in 2021? $ What is Art Major's salary in 2022? $Suppose the money demand function is = 1000 + 0.2Y - 1000 (r + πe). Required (a.) Calculate velocity if Y = 2000, r = 0.06, and πe = 0.04. (b.) If the money supply (Ms) is 2600, what is the price level? (c.) Now suppose the real interest rate rises to 0.11, but Y and Ms are unchanged. What happens to velocity and the price level? (d.) For part (c.), if the nominal interest rate were to rise from 0.10 to 0.15 over the course of a year, with Y remaining at 2000, what would the inflation rate be?