Q.1 Monetarists claim that None of the options stabilisation policies do not work. money supply growth must be controlled. classical model best explains macroeconomy. Q.2 Macroeconomics deals with infrastructure issues. policies surrounding automobile industry. None of the options direct taxes. export-import. Q.3 Rental Income in National Income None of the options includes royalty earnings. includes income from lending technology. include rent received by landlords.

Q.1 Monetarists claim that None of the options stabilisation policies do not work. money supply growth must be controlled. classical model best explains macroeconomy. Q.2 Macroeconomics deals with infrastructure issues. policies surrounding automobile industry. None of the options direct taxes. export-import. Q.3 Rental Income in National Income None of the options includes royalty earnings. includes income from lending technology. include rent received by landlords.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter16: Monetary Policy

Section: Chapter Questions

Problem 19SQ

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In the model SIM of chapter 3 of the book of Godley, Wynne, and Marc Lavoie. 2012. Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth. 2nd ed. 2012 edition., starting from a stationary state simulate the effect of an increase in government expenditure under four variations of the model: a model with simple adaptive expectations Y De = Y D−1, Discuss the trajectory of output from the original stationary state to the new one. G_D is Government goods demand, and theta is Tax rate,
A Keynesian economy is described by the following equations. Consumption Cd = 250 + 0.5(Y - T) - 250r Investment Id = 250 - 250r Government purchases G = 300 Government taxes T = 300 Real money demand L = 0.5Y - 500r + πe Money supply M = 3000 Full-employment output Y = 1250 Expected inflation πe = 0 (HINT a: The expected rate of inflation is assumed to equal zero so that money demand depends directly on the real interest rate, which equals the nominal interest rate. Domestic Savings, Sd =Y - C - G. In equilibrium set domestic savings equal to domestic investment, so Sd = Id) Calculate the values of the real interest rate (r), consumption (Cd), and investment (Id) for the economy in general equilibrium.
Assume an economy’s annual money velocity in circulation is 10. Please answer the following two question: In the view of monetarists (i.e. neoclassical view), if the annual economic growth rate is 6%, what should be the money supply increasing rate to maintain a low inflation rate as 3%? Please show equation.
State and explain the basic equation of monetarism. What is the major cause of macroeconomic instability, as viewed by monetarists?
Assume that as a result of the coronavirus and U.S. (Federal) Government policies to ameliorate or lessen the virus’ public health impact, the U.S. unemployment increases from 3.6% to 13.7% by May, 2020. As part of monetary and fiscal policies, however, beginning in the summer of 2020 the Fed purchases over $3.5 Trillion in U.S. government bonds and Federal Government transfers $5,000 to every U.S. adult over 18 years old (not in college…. sorry) financed by government debt. Then, as a part of its overall public health policies, the U.S. government begins to relax or loosen its previous travel and “shutter in” policies in the Spring 2021 so that people can now go to restaurants, movies or sporting events and the like more freely. Absent increases in the United States long run aggregate supply, the combined economic effects of such policies would most likely be:
Assume that as a result of the coronavirus and U.S. (Federal) Government policies to ameliorate or lessen the virus’ public health impact, the U.S. unemployment increases from 3.6% to 13.7% by May, 2020. As part of monetary and fiscal policies, however, beginning in the summer of 2020 the Fed purchases over $3.5 Trillion in U.S. government bonds and Federal Government transfers $5,000 to every U.S. adult over 18 years old (not in college…. sorry) financed by government debt. Then, as a part of its overall public health policies, the U.S. government begins to relax or loosen its previous travel and “shutter in” policies in the Spring 2021 so that people can now go to restaurants, movies or sporting events and the like more freely. Absent increases in the United States long run aggregate supply, the combined economic effects of such policies would most likely be: A. Lower GDP growth. B. Higher rates of inflation. C. Higher unemployment rates…
Assume that the economy is in a recessionary (deflationary) gap and there isunemployment of labour. Compare and contrast what will happen in the view of a monetarist/new classical economist and in the view of a Keynesian economist, if there is no government intervention?
Which of the following statements are true? An increase in government debt is inflationary when government bonds and cash are perfect substitutes Monetarism is a theory about how banks create inflation Government bonds and private debt are perfect substitutes Labour market responses to Covid created inflation
Monetarist theorists argue that any positive effect increased government spending might have on the level of income is completely negated by the negative effects such a development has on investment spending. a. True. b. False.
Which of the following statements is true?a. Keynesians advocate increasing the moneysupply during economic recessions butdecreasing the money supply during eco-nom1c expansions.b. Monetarists advocate increasing the money supply by a constant rate year afteryear.c. Keynesians argue that the crowding-out effect is rather insignificant.d. Monetarists argue that the crowding-out effect is rather large.e. All of the answers are correct.
Suppose Bangladesh Bank (BB) decided to follow the Taylor rule to conduct monetary policy. BB's target interest rate is the lending rate. The economists in BB understands that there will be some time lag for their policy to be effective and therefore they use a forecasted or expected inflation rate (instead of current inflation rate) in their policy rule. BB is equally concerned about output and inflation. According to BB's estimate the equilibrium real lending rate is 5 percent. BB's inflation target is 3 percent and the deviation of actual output from the potential output (as measured by the HP filter) is 1 percent.a. If the expected inflation rate is 6%, then at what target should the lending rate be set according to the Taylor rule?
QUESTION 1 The major difference between the Keynesian approach and the monetarist approach is that a. there are no differences. b. Keynesian analysis explains an equilibrium condition and monetarism does not. c. monetarism explains an equilibrium condition and Keynesian analysis does not. d. in Keynesian analysis, money affects the economy by first affecting interest rates; monetarist analysis is not limited to working through interest rates. QUESTION 2 When comparing the Keynesian and monetarist approaches, the only substantive difference is that a. Keynesians approach aggregate demand by multiplying the money supply by velocity, while monetarists use the equilibrium conditions of the expenditure schedule. b. Keynesian analysis suggests that money affects consumption first while monetarist analysis suggests that money affects investment spending first. c. the Keynesian equation leads to a prediction of real GDP; the monetarist equation…