suppose the federal reserve needs to bring inflation under control and decides to raise the interest rate by 1 point. Use the graph below to decide on the appropriare course of action if the reserve requirement is 0% but banks like to hold 10% of deposits as reserves and the public likes to hold 3% of their money as cash
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suppose the federal reserve needs to bring inflation under control and decides to raise the interest rate by 1 point. Use the graph below to decide on the appropriare course of action if the reserve requirement is 0% but banks like to hold 10% of deposits as reserves and the public likes to hold 3% of their money as cash
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- The Federal Reserve, the central bank of the United States, has an inflation target of 0.3% per month. According to the Quantity Theory of Money, by how much must the Federal Reserve grow the money stock in order to hit its inflation target? The Federal Reserve must decrease the money stock by 0.3% per year. The Federal Reserve must increase the money sock by 0.3% per year. The Federal Reserve must decrease the money stock by 0.3% per month. The Federal Reserve must increase the money stock by 0.3% per month.Explain why this following statement is true or false? a) Decreasing inflation rate and increasing purchasing power are caused by too many amount of money in circulation.Economics Suppose that the income elasticity of money demand is 0.4. Nominal interest rates do not change over time. If money supply increases by 20% every year, while real income only increases by 1%, what is the inflation rate?
- 1.16 Read the following extract and answer question A dull Reserve Bank meeting may be a good thing As markets get jittery about inflation and interest rates, the Bank is a sea of calm calculation .Governor Lesetja Kganyago will see having been able to keep interest rates at 50-year lows as a vindication of past policy. Two months ago, some of SA's peers in emerging markets, namely Turkey, Russia and Brazil, already tightened policy. "If you want lower interest rates you have got to have lower inflation," Kganyago told Business Day a month ago, comments that made it clear the Bank is in no rush to raise interest rates, even though its projection model suggested that policy tightening would start in the second quarter. The view being expressed by Governor Lesetja Kganyago above are that of. a) The monetarist approach to inflation b) Cost pull inflation c) Demand push inflation d) The conflict approachIn recent discussion, attention was devoted to the role of the central bank, the quantity theory of money, and the relationship between the money supply and inflation. Please answer the following two questions: A. One of my favorite economists, Milton Friedman, is attributed with the quote: "Inflation is everywhere and always a monetary phenomenon." Explain its meaning, relate it to the quantity theory of money, and explain the quantity theory of money. B. Why might it be in the federal government's benefit to generate inflation?Suppose the Federal Reserve needs to bring inflation under control and decides to raise the interest rate by 1 point. Use the graph below to decide on the appropriate course of action if the reserve requirement is 0%, but banks like to hold 10% of deposits as reserves and the public likes to hold 3% of their money as cash. i 5% 4% MA $1250 $1600 O Buy $45.5 billion in bonds O Sell $350 billion in bonds Buy $2692.30 billion in bonds Buy $26.92 billion in bonds O Sell $45.5 billion in bonds O Sell $26.92 billion in bonds MB O Buy $350 billion in bonds D Money QMoney (billions)
- 1.17 Read the following extract and answer question A dull Reserve Bank meeting may be a good thing As markets get jittery about inflation and interest rates, the Bank is a sea of calm calculation .Governor Lesetja Kganyago will see having been able to keep interest rates at 50-year lows as a vindication of past policy. Two months ago, some of SA's peers in emerging markets, namely Turkey, Russia and Brazil, already tightened policy. "If you want lower interest rates you have got to have lower inflation," Kganyago told Business Day a month ago, comments that made it clear the Bank is in no rush to raise interest rates, even though its projection model suggested that policy tightening would start in the second quarter. 1.17 In order to keep the interest rates low, which of the following instruments will it use? a) Quantitative easing b) Open-market policy c) Increase government spending d) Raise taxesMost central banks, like the Bank of England, set targets for their economy's inflation rate. The Bank of England has an inflation target of 3.5% per year. According to the Quantity Theory of Money, by how much must the Bank of England grow the money stock in order to hit its inflation target? The Bank of England must decrease the money stock by 3.5% per year. The Bank of England must increase the money stock by 3.5% per year. The Bank of England must decrease the money stock by 3.5% per month. The Bank of England must increase the money stock by 3.5% per month.Briefly explain the quantity theory of money and how it is related to inflation.
- The government of a country increases the growth rate of the money supply from 5 percent per year to 50 percent per year. a) What happens to prices? b) What happens to nominal interest rate? c) Why might the government be doing this?Does the Quantity Theory of Money adequately explain the cause of inflation?Why Inflation is referred as monetary phenomena. explain using graphs