MACROECONOMICS (LL)
21st Edition
ISBN: 9781260186949
Author: McConnell
Publisher: MCG
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Chapter 16, Problem 7DQ
To determine
Cyclical Asymmetry and the Liquidity Trap.
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54) If a higher inflation is expected, what would you expect to happen to the shape of the yield curve? Why?
55) What is the shape of the yield curve when short rates are expected to fall in the medium term, and then increase? Demonstrate this graphically.
56) What is the shape of the yield curve when short-term rates are expected to rise sharply in the mid-term and moderately in the long-term?
57) When interest rates on 1-2-3-4-5 year bonds are 2.0, 2.1, 2.3, 2.4, and 2.5 percent respectively, what information do we derive on future economic growth and real output?
D7
Suppose that people hold 17 cents out of every dollar of deposits as currency. Suppose that banks hold 13 cents out of every dollar of deposits as excess reserves. If the Fed buys $100 billion worth of Treasury securities on the open market, what is the change in the money supply? Make sure to express your answers in billions. Make sure to round your answers to the nearest 100th decimal points. For example, 24.56 for $24.56 billion.
11. Since 1990, money supply in the Japanese economy has doubled. Over the same period,nominal GDP in Japan has stayed almost constant. According to the Quantity Theory of Money,this suggests thata) the level of real GDP must have decreased.b) the level of real GDP must have increased.c) the velocity of money must have decreased.d) none of the above
13. According to the trilemma, which of the following is a potential cost of adopting a flexibleexchange rate regime?a) A country may have to restrict the size of capital flows.b) A country may su↵er from a volatile exchange rate.c) A country loses the ability to conduct independent monetary policy.d) None of the above.
14. In an open economy, if the level of net exports rises, it must be the case thata) there is an increase in saving.b) there is an increase in investment.c) the value of saving less investment must fall.d) none of the above
Chapter 16 Solutions
MACROECONOMICS (LL)
Ch. 16.1 - Prob. 1QQCh. 16.1 - Prob. 2QQCh. 16.1 - Prob. 3QQCh. 16.1 - Prob. 4QQCh. 16.4 - Prob. 1QQCh. 16.4 - Prob. 2QQCh. 16.4 - Prob. 3QQCh. 16.4 - Prob. 4QQCh. 16.5 - Prob. 1QQCh. 16.5 - Prob. 2QQ
Ch. 16.5 - Prob. 3QQCh. 16.5 - Prob. 4QQCh. 16 - Prob. 1DQCh. 16 - Prob. 2DQCh. 16 - Prob. 3DQCh. 16 - Prob. 4DQCh. 16 - Prob. 5DQCh. 16 - Prob. 6DQCh. 16 - Prob. 7DQCh. 16 - Prob. 8DQCh. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - Prob. 3RQCh. 16 - Prob. 4RQCh. 16 - Prob. 5RQCh. 16 - Prob. 6RQCh. 16 - Prob. 7RQCh. 16 - Prob. 8RQCh. 16 - Prob. 9RQCh. 16 - Prob. 1PCh. 16 - Prob. 2PCh. 16 - Prob. 3PCh. 16 - Prob. 4PCh. 16 - Prob. 5PCh. 16 - Prob. 6PCh. 16 - Prob. 7P
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- Suppose the economywide demand for money is given by: M = P(0.3Y − 25,000i). The price level P equals 3, and real output Y equals 8,000. a. At what value should the Fed set the nominal money supply if it wants to set the nominal interest rate at 2 percent? The nominal money supply should be set at $ . b. At what value should the Fed set the nominal money supply if it wants to set the nominal interest rate at 3 percent? The nominal money supply should be set at $ .arrow_forwardSince the Fed has begun paying interest on bank reserves at the Fed, do barks still want to avoid holding excess reserves? Context: If lending was more profitable than the currently very low interest rate (formerly zero) that could be received from the Fed on excess reserves, we would still normally expect barks to lend out excess reserves rather than maintain them as excess reserves Judging from the fact that there has been a huge increase in holdings of excess reserves in the barking system, however, there may well be other constraints (such as Basel III) that may be limiting bank's willingness to lend out excess reserves.arrow_forward5. 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 of money? B.) Suppose that velocity is constant, and the economy’s output of goods and services rises by 5% each year. C.) What will happen to nominal GDP and the price level next year if the Fed keeps the money supply constant? D.) What money supply should the Fed set next year if it wants to keep the price level stable? E.) What money supply should the Fed set next year if it wants an inflation rate of 10%.arrow_forward
- Suppose that this year’s money supply is £500 billion, nominal GDP is £10 trillion, and real GDP is £5 trillion. 1. Suppose that velocity is constant, and the economy’s output of goods and services rises by 5 percent each year. What will happen to nominal GDP and the price level next year if the Fed keeps the money supply constant? 2. What money supply should the Fed set next year if it wants to keep the price level stable? 3. What money supply should the Fed set next year if it wants inflation of 10 percent?arrow_forwardConsider a situation where the central bank increases the money supply. equal, if nominal GDP increased by $800 billion during a time when veloc did the central bank increase the money supply? O $400 million O $200 million O $200 billion O $400 billion No new data to save. Last checkarrow_forwardSince 2009, how much has been borrowed through the federal funds market? O. $787 million O. $43 billion O. $1,148 billion Incorrect O. $0arrow_forward
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