Homework Answers
Excessive money supply growth, will make rise in the price level and inflation rate soars high. It leads to the decrease in the value of purchasing power of money. It will make investors to demand higher yield so that the reduction in purchasing power is compensated by the higher return before making investments in the bond. So, in the market, bond issuers have to give higher yield to make the investors buy the bonds.
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26. Explain how excessive money supply growth by the central bank may lead to higher bond...
27. Explain how higher federal budget deficits may contribute to higher bond yields using the supply...
27. Explain how higher federal budget deficits may contribute to higher bond yields using the supply and demand for loanable funds theory to make your argument. (Hint: crowding out)
"The money supply of an economy increases when the central bank simultaneously decreases the reserve requirement...
"The money supply of an economy increases when the central bank simultaneously decreases the reserve requirement and sells government bonds in open market." Explain whether this statement is true, false or uncertain. (6 marks) What should money growth rate be if real output grows 4% per year, velocity grows 2% per year, and the central bank targets inflation to be 2% per year? (4 marks) What is the inflation tax? Explain. (6 marks) Explain (with the aid of diagrams) whether...
a. Explain how the Central bank can change the money supply? (3 marks) b. Using appropriate...
a. Explain how the Central bank can change the money supply? (3 marks) b. Using appropriate diagrams, critically analyse the short run and long run effect of a contractionary monetary policy on aggregate demand. (7 marks)
For a given level of inflation expectations, if the central bank increases the money supply growth...
For a given level of inflation expectations, if the central bank increases the money supply growth rate, then in the short run a. the Phillips curve shifts left b. the economy moves down along the short-run Phillips curve C. the economy moves up along the short-run Phillips curve. d. the Phillips curve shifts right.
QUESTION 4 a. Explain how the Central bank can change the money supply? (3 marks) b....
QUESTION 4 a. Explain how the Central bank can change the money supply? (3 marks) b. Using appropriate diagrams, critically analyse the short run and long run effect of a contractionary monetary policy on aggregate demand. (7 marks)
Central Bank wants to increase the money supply to the economy. Then: a) It will buy...
Central Bank wants to increase the money supply to the economy. Then: a) It will buy bonds from the market b) It will sell bonds in the market c) It will increase the interest rate d) (a) and (c) e) (b) and (c)
Assume the economy was in equilibrium and then the central bank injects money into the economy...
Assume the economy was in equilibrium and then the central bank injects money into the economy (increases money supply). Draw a graph showing how the market for money changes due to the monetary injection. (6 points). (Explain the changes in words) b) Summarize how the value of money, price level, and quantity of money change. (4 points).
11. The central bank in the U.S increased the money supply in the latter part of...
11. The central bank in the U.S increased the money supply in the latter part of the first decade of the 2000s in response to a recession caused by a partial collapse of the banking and housing markets. The central bank might have done this by A. selling bonds on the open market, which would have raised the value of money. B. purchasing bonds on the open market, which would have raised the value of money. C. selling bonds on...
The FED (Central Bank in the USA) is watching the actions of the federal government and...
The FED (Central Bank in the USA) is watching the actions of the federal government and believes that federal government spending will increase next quarter which will lead to future rates of inflation greater than 3 percent. Using the Money Supply Model explain how the FED will use its TOOLS and affect inflation. Define the key macro terms and the Money Supply Model in business friendly terms. Businesses are concerned about both inflation and higher interests. Explain why they are...
Using money supply-money demand and the interest rate parity relationship, show how the central bank can...
Using money supply-money demand and the interest rate parity relationship, show how the central bank can deal with a balance of payments crisis and capital flight.
27. Explain how higher federal budget deficits may contribute to higher bond yields using the supply and demand for loanable funds theory to make your argument. (Hint: crowding out)
For a given level of inflation expectations, if the central bank increases the money supply growth rate, then in the short run a. the Phillips curve shifts left b. the economy moves down along the short-run Phillips curve C. the economy moves up along the short-run Phillips curve. d. the Phillips curve shifts right.
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