PRIN MACROECON LL+CNCT+SMARTBOOK
6th Edition
ISBN: 9781260580792
Author: Frank
Publisher: MCG CUSTOM
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Chapter 13, Problem 3RQ
To determine
Relationship between output gap and inflation and the influence of the relationship in aggregate
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After staying virtually flat for about a year and a half, the average lending rate of banks has started to show signs of decline in April after the Bank of Ghana reduced the monetary policy rate the month before. The Summary of Economic and Financial Data (May 2020) published by the Bank of Ghana has shown that average lending rate has finally moved out of its comfort zone to a step downward. Prior to recording 22.38 percent in April, the average lending rate has since the past 17 months (December 2018) not come below 23%.How would banks benefit when interest rates decrease?
Anna Graham is the new Treasury Secretary, and she is trying to interpret some inflation measures. In year one, the aggregate
price level increased by 11% and in year two, the aggregate price level decreased by 1%.
Which statement accurately characterizes the changes in the nation's price level?
In year one, the economy is experiencing deflation. In year two, the economy is experiencing inflation.
In year one, the economy is experiencing inflation. In year two, the economy is also experiencing inflation.
In year one, the economy is experiencing inflation. In year two, the economy is experiencing deflation.
In year one, the economy is experiencing deflation. In year two, the economy is experiencing disinflation.
Suppose that the level of unemployment in the economy is determined by the follow equation:
U = 5.24 - 1.87*(i - ie)
Where U is the unemployment rate, i is the actual inflation rate, and it is the expected inflation
rate. All variables are entered in percentage form (e.g. if inflation is 30.57%, you plug in 30.57 for i,
not 0.3057).
Last year, the inflation rate was 5.24%, and people have adaptive expectations. What does the
inflation rate need to be this year in order for the unemployment rate to be 3.01%?
Note: Everything is already in percentage form. You do not need to multiply or divide by 100 at any point.
Enter in your answer as it is calculated in the equation.
Round your final answer to two decimal places.
Chapter 13 Solutions
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