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6. MONETARY AND FISCAL POLICY WITH AN INTEREST RATE TARGET a. What is the slope of...
What determines the magnitude of the changes in price level when central bank takes monetary policy...
What determines the magnitude of the changes in price level when central bank takes monetary policy measures that leads to a change in the aggregate demand? a. Changes in the money supply b. Slope of the aggregate supply curve c. Rate of change of interest rate d. Total money supply in the economy
NOTE: In the following analysis we still assume that commodity prices are fixed and there is no f...
NOTE: In the following analysis we still assume that commodity prices are fixed and there is no foreign trade. 1. What determines the demand for real money balances? Why does it depend on the nominal rather than the real interest rate? 2. What is the LM curve? 3. What determines the slope of the LM curve? 4. If the interest sensitivity of the demand for real money (the absolute inverse slope, or flatness of the demand curve for real money,...
Please box answers! Thank you. 11. Monetary policy and the LM curve Aa Aa The following graph shows the demand and supply of real money balances in a hypothetical economy. Use the black point (X point...
Please box answers! Thank
you.
11. Monetary policy and the LM curve Aa Aa The following graph shows the demand and supply of real money balances in a hypothetical economy. Use the black point (X point) to indicate the equilibrium in this market. Dashed drop lines will automatically extend to both axes. REAL INTEREST RATE [Percent) 10 Equilibrium Supply New Supply New Equilibrium Demand 3 0 10 20 30 40 50 60 70 80 90 100 REAL MONEY BALANCES Help...
Answer Q2 and Q3 please Question 5: A monetary policy response to an increase in the...
Answer Q2 and Q3 please
Question 5: A monetary policy response to an increase in the risk premium say that, initially, the real interest rate (r) is 2%, and the risk premium (x) is 1%. Suddenly, there is an increase in the default risk of borrowers, and the risk premium increases by 4%. a. Show the effect of this increase in the risk premium on the level of output using the IS b. Say that the central bank wants to...
Suppose the central bank, instead of following the rule r = r(Y,π), has a target level...
Suppose the central bank, instead of following the rule r =
r(Y,π), has a target level of inflation. Specifically, it sets r
according to r = rLR + b[π − π*]. Here rLR is the real interest
rate when the economy is in long-run equilibrium; that is, it is
the real interest rate that causes the loan market to be in
equilibrium when Y = �Y. In addition, π* is the central bank’s
target level of inflation, and b is...
Question 1 The advantage of an explicit inflation target is that it: A. Group of answer...
Question 1 The advantage of an explicit inflation target is that it: A. Group of answer choices B. allows banks to set interest rates C. raises the marginal product of capital D. stabilizes money supply E. helps anchor inflation expectations F. completely eradicates discretionary monetary policy Flag this Question Question 2 The slope of the aggregate demand curve is determined A. by the sensitivity of short-run output to both inflation and the real interest rate. B. only by the sensitivity...
. What are the “crowding-out effects” that limit the effectiveness of fiscal and monetary policy to...
. What are the “crowding-out effects” that limit the effectiveness of fiscal and monetary policy to stimulate the economy under the IS-LM mechanism? Specifically: a. How would the interest elasticities of the demand for investment and money affect the efficacy of fiscal vs. monetary policies? b. How would uncertainty about expected future taxes and regulations that increase labor costs to firms affect “autonomous” investments (the constant term in the investment demand function) and equilibrium output? c. How do financial regulations...
If money demand does not depend on the interest rate, then the LM curve is ______...
If money demand does not depend on the interest rate, then the LM curve is ______ and ______ policy has no effect on output. A. horizontal; monetary B. vertical; monetary C. horizontal; fiscal D. vertical; fiscal
1) of the Central Bank of Kuwait puts in place an expansionary monetary policy, its decision...
1) of the Central Bank of Kuwait puts in place an expansionary monetary policy, its decision is based on A) the fact that the economy is at ful employment B) Expectation of excessive inflation in the future C) the fact that the economy is in an expansion D) Unemployment level is high 2) When the interest rate is set at a very low rate A) the opportunity cost of holding money is very low B) the money demand will shift...
(a)- Distinguish-between-intermediate target and operating target of monetary policy (-6-marks) (b) Discuss the-major-monetary policy tools used...
(a)- Distinguish-between-intermediate target and operating target of monetary policy (-6-marks) (b) Discuss the-major-monetary policy tools used by the- Federal-Reserve of the-USA to-influence money-supply.. (9-marks) (c)- If a-yield-curve-looks-like the-one-shown-below. What-is the-market predicting about the movement of future short-term- interest rate? What might the yield-curve indicate about the market prediction for the inflation rate in the future? (10-marks) Tn to maturt
Please box answers! Thank
you.
11. Monetary policy and the LM curve Aa Aa The following graph shows the demand and supply of real money balances in a hypothetical economy. Use the black point (X point) to indicate the equilibrium in this market. Dashed drop lines will automatically extend to both axes. REAL INTEREST RATE [Percent) 10 Equilibrium Supply New Supply New Equilibrium Demand 3 0 10 20 30 40 50 60 70 80 90 100 REAL MONEY BALANCES Help...
Answer Q2 and Q3 please
Question 5: A monetary policy response to an increase in the risk premium say that, initially, the real interest rate (r) is 2%, and the risk premium (x) is 1%. Suddenly, there is an increase in the default risk of borrowers, and the risk premium increases by 4%. a. Show the effect of this increase in the risk premium on the level of output using the IS b. Say that the central bank wants to...
Suppose the central bank, instead of following the rule r =
r(Y,π), has a target level of inflation. Specifically, it sets r
according to r = rLR + b[π − π*]. Here rLR is the real interest
rate when the economy is in long-run equilibrium; that is, it is
the real interest rate that causes the loan market to be in
equilibrium when Y = �Y. In addition, π* is the central bank’s
target level of inflation, and b is...
1) of the Central Bank of Kuwait puts in place an expansionary monetary policy, its decision is based on A) the fact that the economy is at ful employment B) Expectation of excessive inflation in the future C) the fact that the economy is in an expansion D) Unemployment level is high 2) When the interest rate is set at a very low rate A) the opportunity cost of holding money is very low B) the money demand will shift...
(a)- Distinguish-between-intermediate target and operating target of monetary policy (-6-marks) (b) Discuss the-major-monetary policy tools used by the- Federal-Reserve of the-USA to-influence money-supply.. (9-marks) (c)- If a-yield-curve-looks-like the-one-shown-below. What-is the-market predicting about the movement of future short-term- interest rate? What might the yield-curve indicate about the market prediction for the inflation rate in the future? (10-marks) Tn to maturt
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