If the quantity of money increases by 20 percent and the velocity of circulation is stable, what is the new price level? The new price level is _____ . >>> Answer to 1 decimal place. Look at screenshot attached thanks
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If the quantity of money increases by 20 percent and the velocity of circulation is stable, what is the new
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- Suppose that this year’s money supply is $500 billion,nominal GDP is $10 trillion, and real GDP is $5 trillion.a. What is the price level? What is the velocity ofmoney?b. Suppose that velocity is constant and theeconomy’s output of goods and services rises by5 percent each year. What will happen to nominalGDP and the price level next year if the Fed keepsthe money supply constant?c. What money supply should the Fed set next yearif it wants to keep the price level stable?d. What money supply should the Fed set next yearif it wants inflation of 10 percent?(a) Calculate each of the following for Year 2. Show your work. (i) Real GIDP per capita for Arturia (il) Real GDP per capita for Ringberg (b) If Arturia and Ringberg have the same velocity of money in Year 2, which nation must have the higher money supply in Year 2? Explain (c) Calculate each of the following in Year 2. Show your work. (i) The inflation rate in Arturia (il) The inflation rate in Ringberg (d) Based on your answer to part (c), if the nominal interest rate is the same for both nations in Year 2, which nation experiences the higher real interest rate in Year 2? Explain. (e) Ringberg produces consumer goods and capital goods. While maintaining full employment, Ringberg decides to allocate more resources to the production of consumer goods. What will be the effect on the long-run economic growth rate in Ringberg? Explain. esc C 1 の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-)
- Assume the following IS-LM model: expenditure sector: money sector: AD = C + I + G + NX I = 300 - 20i M = 700 C = 100 + (4/5)YD G = 120 P = 2 YD = Y - TA NX = -20 md = (1/3)Y + 200 - 10i TA = (1/4)Y a. Derive the equilibrium values of consumption (C) and money demand (md). b. How much investment (I) will be crowded out if the government increases its purchases by DG = 160 and nominal money supply (M) remains unchanged? c. By how much will the equilibrium level of income (Y) and the interest rate (i) change, if the Fed responds to this increase in government purchases by increasing nominal money supply to M' = 1,100?Calculate what happens to nominal GDP if velocityremains constant at 4 and the money supply increasesfrom $250 billion to $375 billionQuestion: Consider an economy where the velocity of money is constant, and the economy is at full employment. If the central bank decides to increase the money supply by 5% but at the same time, the government imposes new taxes that effectively remove 5% of the consumers' disposable income, what would be the likely short-term effect on the nominal Gross Domestic Product (GDP) and the general price level? A) Nominal GDP remains unchanged; the general price level increases. B) Nominal GDP increases; the general price level remains unchanged. C) Nominal GDP remains unchanged; the general price level decreases. D) Nominal GDP increases; the general price level increases. Please don't use chatgpt it is giving wrong answer. Please try do it with yourself.
- 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.Give typing answer with explanation and conclusion A standard "money demand" function used by macroeconomists has the form ln(m)=β0+β1ln(GDP)+β2R, Where m is the quantity of (real) money, GDP is the value of (real) gross domesticproduct, and R is the value of the nominal interest rate measured in percent per year. Supposed that β1 = 2.66 and β2 = −0.05. A) What is the expected change in m if GDP increases by 4%? The value of m is expected to_________(increase or decrease ) by approximately ________% (Round your response to the nearest integer) B) What is projected to change in m if the interest rate increases form 2% to 6% ? The value of m is expected to ________(increase/decrease) by approximately ________% (Round your response to the nearest integer)1) Inflation in Theoretica is currently below the target range of its central bank. What does this tell you regarding Theoretica’s likely output gap? Illustrate it using an AS-AD diagram, and briefly explain your diagram 2) Your mother states that lowering interest rates in the recessionary COVID-19 period is good policy because it will guarantee consumers will spend more as it is cheaper to borrow money. Do you agree or disagree with her statement? Provide two reasonings to justify your answer. 3) Is either helicopter money or quantitative easing preferred in times of severe recessions in order to boost economic activity? Explain your reasoning.
- Now, consider an economy in which the demand for money is of the formY(1 + it)for t = 0, 1, 2, · · · , where output is 150 and it denotes the nominal interest rate inperiod t. The REAL INTEREST RATE, denoted r, is constant and equal to 4%. In period0 and 1, the money supply is 100 and people expect that money supply wouldbe 100 forever. People have rational expectations. In period 2, the central banksurprises people and sets the 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. Find the inflation rate, nominal interest rate, real money balance in period 1,and expected inflation in period 2, given the information available in period1, π1, i1,M1 / P1, and, E1π2. B. Find the inflation rate, nominal interest rate, real money balance in period 2,and expected inflation in period 3, given the information available in period 2. (π2, i2, M2 / P2 and E2π3.) C. Find the inflation rate, nominal interest rate, and real money…Now, consider an economy in which the demand for money is of the formY / (1 + it) for t = 0, 1, 2, · · · , where output is 150 and it denotes the nominal interest rate inperiod t. The real interest rate, denoted r, is constant and equal to 4%. In period0 and 1, the money supply is 100 and people expect that money supply wouldbe 100 forever. People have rational expectations. In period 2, the central banksurprises people and sets the 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 . Find the inflation rate, nominal interest rate, real money balance in period 1,and expected inflation in period 2, given the information available in period1, π1, i1, M1 / P1 and, E1π2. B . Find the inflation rate, nominal interest rate, real money balance in period 2, and expected inflation in period 3, given the information available in period 2, π2, i2, M2 / P2 and E2π3. C . Compare E1π2 and π2.E4 Assume the real money demand of an economy is:(Md/P) = 2×Yb(r + πe)-awhere 0 < b < 1 and 0 < a < 1.a) Use the real money demand above to determine the velocity of money.b) Does the quantity theory of money hold in this economy? Explain.c) Show with calculus how the velocity of money reacts to a change in output and a changein the nominal interest rate.d) Find the income and the nominal interest rate elasticities of money demand.