I Numerical Analysis 1. Suppose that the money demand function is (4) = 1000 - 100r where r is the interest rate in percent. The money supply M is 1000 and the price level P is 2. (a) What is the equilibrium interest rate? (b) Assume the price level is fixed. Compute the equilibrium interest rate if the supply of money is raised from 1000 to 1200?

I Numerical Analysis 1. Suppose that the money demand function is (4) = 1000 - 100r where r is the interest rate in percent. The money supply M is 1000 and the price level P is 2. (a) What is the equilibrium interest rate? (b) Assume the price level is fixed. Compute the equilibrium interest rate if the supply of money is raised from 1000 to 1200?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter2: Mathematics For Microeconomics

Section: Chapter Questions

Problem 2.11P

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Suppose the money demand function is = 1000 + 0.2Y - 1000 (r + πe). Required (a.) Calculate velocity if Y = 2000, r = 0.06, and πe = 0.04. (b.) If the money supply (Ms) is 2600, what is the price level? (c.) Now suppose the real interest rate rises to 0.11, but Y and Ms are unchanged. What happens to velocity and the price level? (d.) For part (c.), if the nominal interest rate were to rise from 0.10 to 0.15 over the course of a year, with Y remaining at 2000, what would the inflation rate be?
5-) Question : Variables expressed in terms of are called .. Variables ..... Please select one or more option: a) physcial units / endogenous b) exogenous units / real c) money / nominal d) physical units/ real e) endogenous units / nominal 6-) Question: . implies that an increase in . will increase umw m m a) neutrality of money / inflation / real interest rates b) inflation / prices / both saving and investment c) neutrality of money / the money supply / nominal interest rates d) inflation / prices / real GDP e) neutrality of money / the money supply / real interest rates
Assume that the demand for real money balances is given by the equation M/P = 0.6Y -100i, where Y output and i is the nominal interest rate (in percent). (a) If Y is 1,000, M is 100, and i is 4 percent, what must P be? (b) If i is 4 percent and the expected price level percent change (inflation) is 1 percent, what is the real interest rate? (c) Using the information above, graph the monetary market equilibrium and graph the LM relation. (d) Assume that Treasury Bonds pay an interest rate of 3 percent. A risk-neutral investor has the option of purchasing this bond or purchasing a bond from a company that has a 1 percent possibility of going bankrupt and defaulting. What should the risk premium for the company bond be?
Desired consumption is Cd = 2000 + 0.9Y - 100,000r - G, and desired investment is I d = 1000 - 45,000r. Real money demand is Md/P =Y - 6000i. Other variables are πe = 0.03, G = 500, Y = 1000, and M = 2100. Required (a.) Find the equilibrium values of the real interest rate, consumption, investment, and the price level. (b.) Suppose government purchases decline to 450. What happens to the variables listed in part (a)? (c.) Suppose government purchases rise to 650. What happens to the variables listed in part (a)? (d.) What feature in this example leads to the result that you don’t need to know the amount of taxes collected by the government to find the equilibrium?
True or false In technical analysis the larger the number of days used in a moving average, the less smoothing of prices will occur When the dollar weakens, a sale made overseas in a foreign currency translates into more dollars back home. In technical analysis the larger the number of days used in a moving average, the less smoothing of prices will occur
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esources Assume the following: (1) the interest rate on six-month treasury bills is 8 percent per annum in the United Kingdom and 4 percent per annum in the United States; (2) today's spot price of the pound is $1.50, while the six-month forward price of the pound is $1.485. If the price of the six-month forward pound were to then U.S. investors would no longer earn an extra return by shifting funds to the United Kingdom. O rise to $1.52 O rise to $1.55 O fall to $1.40 O fall to $1.47
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LIve Tutorial Remaining Time: 36 minutes, 54 seconds. Question Completion Status: A Moving to another question will save this response. Question 2 How does the demand for money curve shift? O If shifts rightward as income level decreases O If shifts rightward as interest rate level increases O If shifts leftward as interest rate level increases O If shifts rightward as income level increases A Moving to another question will save this response. abb7af36-46ad-41..jpg őb000097-b965-4.jpg 7806741f-653a-4d.jpg e0b125f4-ed5f-4b..jpg 69d515ed-f467-44.jpgA enovo 近

Suppose the central bank in the nation of Zook attempts to pay off its national debt by printing large amounts of currency. The large increase in the money supply causes the price level to rise by 500 percent. what do you expect will happen to the value of Zook's currency? The value of Zook's currency will ( insrease/ decrease) by (?) %.
10 00 Interest Rate (%) N B Investment Demand 0 $30 60 90 120 150 Investment ($) Price Level Multiple Choice AS Real GDP ($) AD₁ (1=120) AD₂ (1=90) *AD3 (1=60) Refer to the graphs, in which the numbers in parentheses near the AD₁, AD2, and AD3 labels indicate the level of investment spending associated with each curve. All numbers are in billions of dollars. The interest rate and the level of investment spending in the economy are at point D on the investment demand curve. To achieve the long-run goal of a noninflationary, full-employment output Qfin the economy, the Fed should try to decrease aggregate demand by increasing the interest rate from 2 to 4 percent. decrease aggregate demand by increasing the interest rate from 4 to 6 percent. increase aggregate demand by decreasing the interest rate from 4 to 2 percent. increase the level of investment spending from $120 billion to $150 billion.