The quantity theory of money addresses the Select one: a. determinants of the equilibrium unemployment rate. b. short-run effect the quantity of money has on the price level. c. determinants of potential GDP. d. Iong-run effect the quantity of money has on the price level.
Q: Suppose that the rate of change of aggregate prices fro This economy is experiencing: А. inflation…
A: The answer and explanation is as follows:-
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Q: f. Judging by the impact of the money supply on nominal and real wages, is this analysis consistent…
A:
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A: The quantity theory of money:The quanity thory of money equation can be written as follows:
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Q: Answer the following questions. 2.1 One good: barley. The economy has enough labor, capital, and…
A: 2.1 Y=800 Ms= $2000 P= $10/bushel
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A: * ANSWER :- (1) From the given information the answer is provided below as ,
Q: The quantity theory of money: What is the key endogenous variable in the quan-tity theory? Explain…
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- 7. According to the quantity theory of money, which variable is most stable in thelong run?a. Velocityb. Outputc. Moneyd. Price LevelsThe quantity theory of money: What is the key endogenous variable in the quan-tity theory? Explain the efect on this key variable of the following changes: (a) Te money supply is doubled.(b) Te velocity of money increases by 10%.(c) Real GDP rises by 2%.(d) Te money supply increases by 3% while real GDP rises by 3% at thesame timeE4 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.
- E4 How to draw AD and AS curve for this? AD= Y= 700+20 x (600/P) -- 600 is the Money supply (M) AS= Y= 940+ (P - 60) Or how can I draw AD and AS generally when the equations are similar to above?2. Answer the following questions. 2.1 One good: barley. The economy has enough labor, capital, and land to produce Y = 800 bushels of barley. V is constant. In 2020, money supply (MS) = $2,000 P = $10/bushel. For 2021, the central bank increases MS by 10%. According to the quantity equation, compute the 2021 values of nominal GDP and P. Compute the inflation rate for 2020–2021. 2.2 If you deposit money in the bank for one year. Scenario 1: nominal interest rate = 10%, inflation rate = 0% Scenario 2: nominal interest rate = 25%, inflation rate = 15% In which scenario does the real value of your deposit grow the most? Explain. 2.3 Inflation distorts relative prices. What does this mean and why does it impose a cost on society?3)Show and explain the effects of an increase in aggregate demand in the long-run and short-run by using AD–AScurves.2)Show and explain by using a graph, what will happen to the price level and real GDP if the quantity of moneyincreases and the increase is not anticipated; that is, the price level is not expected to change.1)By using aggregate demand (AD) and aggregate supply (AS) curves, show and explain the effects of ananticipated increase in money supply on macroeconomic equilibrium according to Rational ExpectationsHypothesis.
- 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 π2.10 - Which of the following depends on the demand for money, which we say just in case and for this purpose?A) IncomeB) to KeynesC) to the economyD) to interestE) Investment
- In 2019, an economy produces wheat only and has enough labor, capital, and land to produce 500bushels of wheat (Y or real GDP). Price of wheat and money supply are $2 per bushel and $1,000respectively. In 2020, the central bank increases money supply by $ 1040. Suppose both the velocity ofmoney (V) and the amount of wheat produced remain unchanged. a. Compute the velocity of money and nominal GDP in 2019. b. Calculate inflation rate in year 2020. c. Use a well-labelled money supply-demand diagram to illustrate and explain what happen to the pricelevel and the value of money after such money injection?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?The supply of credit cards is given by q = 1400X, where X are real credit card balances, q isthe real price of the credit card balance. You also know that R = 0.05 (nominal interest rate)and P = 100. Answer the following questions about this:(a) If the money supply is M s= $5, 000, if P = 100 is the equilibrium price level, find Y (realoutput).(b) Suppose that the Federal Reserve Bank decides to increase the money supply by 10%.How much is the inflation rate as a result? Explain and justify your answer. (c) Further suppose that at the same time, real output, Y , increases by 10%. Now what isthe inflation rate? Does our quantity theory of money hold here? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
