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Question 10 Suppose that in Macroland the growth rate of real GDP is 6%. The money...
6. Let real GDP growth-2.4% per year, money growth-5% per year, nominal interest rate 4.8% and...
6. Let real GDP growth-2.4% per year, money growth-5% per year, nominal interest rate 4.8% and velocity of money-constant. (a) Find the inflation rate, the real interest rate, and the cost of holding money. (b) What are the inflation rate, the real interest rate, and the cost of holding money if the central bank changes the money growth to 6% per year?
6. Let real GDP growth-2.4% per year, money growth-5% per year, nominal interest rate-4.8%. and velocity...
6. Let real GDP growth-2.4% per year, money growth-5% per year, nominal interest rate-4.8%. and velocity of money-constant. (a) Find the inflation rate, the real interest rate, and the cost of holding money. (b) What are the inflation rate, the real interest rate, and the cost of holding money if the central bank changes the money growth to 6% per year?
6. Let real GDP growth-2.4% per year, money growth-5% per year, nominal interest rate 4.8% and...
6. Let real GDP growth-2.4% per year, money growth-5% per year, nominal interest rate 4.8% and velocity of money-constant. (a) Find the inflation rate, the real interest rate, and the cost of holding money. (b) What are the inflation rate, the real interest rate, and the cost of holding money if the central bank changes the money growth to 6% per year? 2. An economy produces 5 goods. The quantities produced and the prices of the 5 goods in year...
Question 6: Inflation and the quantity theory Suppose velocity is constant, the growth rate of real...
Question 6: Inflation and the quantity theory Suppose velocity is constant, the growth rate of real GDP is 3% per year, and the growth rate of money is 5% per year. Calculate the long-run rate of inflation according to the quantity theory in each of the following cases: (a) What is the rate of inflation in this baseline case? (b) Suppose the growth rate of money rises to 10% per year. (C) Suppose the growth rate of money rises to...
Suppose the world real interest rate is r* = 3%, the gdp growth rates in the...
Suppose the world real interest rate is r* = 3%, the gdp growth rates in the US and the foreign country are 6%, US monetary growth is μUS = 10%, and foreign monetary growth is μFC = 50%. Find inflation rates in both countries, πUS and πFC, nominal interest rates in both countries, iUS and iFC, and the rate of change in the foreign currency value of the $, ΔE/E. Assume the money demand parameter L is constant in both...
Suppose that velocity of money is constant, the expected inflation rate is equal to the actual...
Suppose that velocity of money is constant, the expected inflation rate is equal to the actual inflation rate, and the expected real interest rate is 4%. Answer the following questions. Justify your answers. Does the quantity theory allow for money to be used for assets and risk diversification purposes? When the growth rate of money supply is 7% and the growth rate of real GDP is 3%, what is the nominal interest rate? Let the growth rate of money supply...
If the money supply growth rate permanently increased from 4 percent to...
Question 35 If the money supply growth rate permanently increased from 4 percent to 10 percent, what would we expect to happen to the inflation rate and the nominal interest rate? Both the inflation rate and the nominal interest rate would increase by less than 6 percent. The inflation rate would increase by 6 percent, and the nominal interest rate would increase by less than 10 percent. The inflation rate would increase by less than 6 percent, and the nominal interest rate would increase...
Suppose that the velocity of circulation of money is constant and real GDP is growing at...
Suppose that the velocity of circulation of money is constant and real GDP is growing at 2 percent a year. a) To achieve an inflation target of 2 percent a year, at what rate would the central bank (Bank of Canada) grow the quantity of money? b) At what growth rate of the quantity of money would deflation be created?
Question 1 (a) The rates of growth of money supply is 10%, of velocity of money...
Question 1 (a) The rates of growth of money supply is 10%, of velocity of money circulation 1%, of real GDP 3%, what is the inflation rate? (b) The nominal interest rate is 7%, the inflation rate is 5%, what is the real interest rate?
Homework 4. Q4 (a)Suppose that the velocity of circulation of money is constant, but GDP is...
Homework 4. Q4 (a)Suppose that the velocity of circulation of money is constant, but GDP is not and assume that GDP grows by 5% per year, the quantity of money grows by 14% a year and the nominal interest rate is 11%, can you calculate the real interest rate?(Hint: you should use the equation ∆M +∆V = ∆P +∆Y and the Fisher equation.) (b)Do you believe that people can have expectations that are consistently wrong in the long-run? In other...
6. Let real GDP growth-2.4% per year, money growth-5% per year, nominal interest rate 4.8% and velocity of money-constant. (a) Find the inflation rate, the real interest rate, and the cost of holding money. (b) What are the inflation rate, the real interest rate, and the cost of holding money if the central bank changes the money growth to 6% per year?
6. Let real GDP growth-2.4% per year, money growth-5% per year, nominal interest rate-4.8%. and velocity of money-constant. (a) Find the inflation rate, the real interest rate, and the cost of holding money. (b) What are the inflation rate, the real interest rate, and the cost of holding money if the central bank changes the money growth to 6% per year?
6. Let real GDP growth-2.4% per year, money growth-5% per year, nominal interest rate 4.8% and velocity of money-constant. (a) Find the inflation rate, the real interest rate, and the cost of holding money. (b) What are the inflation rate, the real interest rate, and the cost of holding money if the central bank changes the money growth to 6% per year? 2. An economy produces 5 goods. The quantities produced and the prices of the 5 goods in year...
Question 6: Inflation and the quantity theory Suppose velocity is constant, the growth rate of real GDP is 3% per year, and the growth rate of money is 5% per year. Calculate the long-run rate of inflation according to the quantity theory in each of the following cases: (a) What is the rate of inflation in this baseline case? (b) Suppose the growth rate of money rises to 10% per year. (C) Suppose the growth rate of money rises to...
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