suppse o country nas a money demand functoln pWaere K is a constaint paraimeter Tne Money...
4. Suppose a country has a money demand functiorn (M/P -kY, where k is a constant parameter. The money supply grows by 12 percent per year, and real income grows by 4 percent per year. a. What is the average inflation rate? b. How would inflation be different if real income growth were higher? Explain. c. Suppose that instead of a constant money demand function, the velocity of money in this economy was growing steadily because of financial innovation. How...
Suppose a country has a money demand function (M/P)d = kY, where k is a constant parameter. The money supply grows by 12 percent per year, and the real income grows by 4 percent per year. A) What is the average inflation rate? B) How would inflation be different if real income growth were higher? Explain. C) How do you interpret parameter k? What is its relationship to velocity of money? D) Suppose instead of a constant money demand function,...
Figure: Equilibrium in the Money Market Interest rate, Supply of money Demand for money O, O, O, Quantity of money Refer to Figure: Equilibrium in the Money Market. Equilibrium will occur at interest rate and quantity of money Oriei Orier On2: Qo O roi la
The total demand for money is equal to the transactions demand plus the asset demand for money 1. Assume that each dollar held for transactions purpose is spent on the average 2 times per year to buy final goods and services. If nominal GOP is 600 billion dollars, what is the transaction's demand for money? Number 2. The table below shows the asset demand at certain rates of terest Using your answer to part 1. complete the table to show...
1.Suppose the Baumol-Tobin model of money demand is correct. Everyone is alike and earns money income of $30,000/year. Brokers charge a fee of $2 for every transaction. The money supply is $1000 per person. What is the equilibrium nominal interest rate?Suppose the Fed wants to reduce the interest rate to 2% (.02). How much of an increase in the money supply per person is necessary to do so?2. In the Baumol-Tobin model, show that the optimal solution entails equality between...
eoge D М 21) Suppose the demand for money in the small country is = 0.5Y. Assume P P 1, then Y- real minay Supply a) b) $900 $1500 $2000 $2400
Demand-pull inflation persists because of O A. continuing decreases in the money wage rate. O B. continuing increases in the quantity of money. O C. continuing increases in government expenditures. OD. continuing increases in aggregate supply O E. continuing increases in the real wage rate
The figure shows the demand for money curve in Epsilon. The quantity of money is $3.1 trillion. Draw the supply of money curve. Label it. Draw a point at the equilibrium in the money market. If the interest rate is 5 percent, people will O A. buy bonds, bid up their price, and the interest rate will rise OB. sell bonds, lower their price, and the interest rate will rise O c. buy bonds, bid up their price, and the...
3.Suppose the Baumol-Tobin model of money demand is correct. Everyone is alike and earn money income of $30,000/year. Brokers charge a fee of $2 for every transaction. The money supply is $1000 per person. What is the equilibrium nominal interest rate? Suppose the Fed wants to reduce the interest rate to 2% (.02). How much of an increase in the money supply per person is necessary to do so?
suppose a country has perfectly interest elastic investment demand and low interest elasticity of money demand.Uesing Is-lm analysis, explain the effect of an increase in money demand due to non income determinant on the output and interest rate of this economy when money stock target is uesd as intermediate target. how the result differs from interest rate targeting? which option is better for the economy of this country;monetary or interest rate targeting? justify answer pleas.