What are the two assumptions made in the nonactivist constant-money-growth-rate rule? Describe the alternative rule known...
What are the two assumptions made in the nonactivist constant-money-growth-rate rule? Describe the alternative rule known as the predetermined-money-growth-rate rule and explain why some nonactivists prefer this rule.
Homework Answers
The annual money supply growth rate will be constant at the average annual growth rate of Real GDP. suppose that the average annual real GDP growth rate is around 2.4%, the money supply must be leave freely and allowed to grow at an annual rate of 2.4%. The money supply will continuously grow at this rate, it would not bother about the situation of the economy.
Critics of the constant money rate of growth rule polint out that it makes 2 assumptions:1) rate is constant 2) the money offer is outlined properly. However, there are periods once rate has not been constant. And it'snot clear that definition of the money offer (M1,M2 or some broader financial measure) is that the correct to use.
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What are the two assumptions made in the nonactivist
constant-money-growth-rate rule? Describe the alternative rule
known...
Maintaining the growth of the money supply at a constant rate is an example of a...
Maintaining the growth of the money supply at a constant rate is an example of a A. discretionary policy. B. the gold standard. C. an inflation targeting rule. D. a money demand rule. E. a money targeting rule.
Maintaining the growth of the money supply at a constant rate is an example of a...
Maintaining the growth of the money supply at a constant rate is an example of a O A. the gold standard. OB. an inflation targeting rule. O C. a money targeting rule. OD. discretionary policy. O E. a money demand rule.
Assume that a country's money velocity remains constant and that the rate of money growth is...
Assume that a country's money velocity remains constant and that the rate of money growth is 4%. A) What is the rate of spending growth? B) If money growth increases by 1.5 percentage points and consumption growth increases by 0.5 percentage points, what is the new rate of spending growth? C) Given your answer in Part B, what is the long-run rate of real GDP growth at an inflation rate of 4%?
Short Answers 1. (2 pts) What are the two assumptions when one applies the constant growth...
Short Answers 1. (2 pts) What are the two assumptions when one applies the constant growth model to analyze stock prices? 2. (2 pts) HB Computer has just paid a dividend of $1 (DO) and the growth rate in dividend is expected to be 6% per year into the future. The company's required råte of return Ke is 12%. How much should investors pay for the growth of the company? (i.e., Estimate the value of growth for this company.)
For the constant growth rate dividend model to work, which of the following assumptions must hold?...
For the constant growth rate dividend model to work, which of the following assumptions must hold? The growth rate must be less than the required rate of return. The growth rate must be greater than the required rate of return. The growth rate should always be equal to zero. The growth rate must be equal to the required rate of return.
The following problem illustrates Milton Friedman's money growth rule which is a center piece of the...
The following problem illustrates Milton Friedman's money growth rule which is a center piece of the Monetarist thinking of macroeconomics. Suppose the economy is given by the following: Production Function: Yt = 10 Kt 0.4(Lt Et) 0.6 Consumption Function: Ct = 0.8 Yt Depreciation rate: 8% (i.e. δ = 0.08). Population growth: 2% (i.e. n= 0.02). Technological growth: 2% (i.e. g= 0.02). Money demand: ( ?? ?? ) ? = ? ?(?? ) = 2?? . In addition, suppose that...
7. Assume that output growth in the U.S. is 2%, money demand (L) is constant and money supply growth is 4%. Assume that...
7. Assume that output growth in the U.S. is 2%, money demand (L) is constant and money supply growth is 4%. Assume that output growth in China is 5%, L is constant and money supply growth is 9%. a. Assume that relative PPP and the quantity theory of money holds. What is the growth rate of the dollar-China exchange rate (%∆E$/China)? b. What should money supply growth be in China if China wants to fix its currency to the dollar?...
The GDP growth rate is 8 percent and inflation is 4 percent. If the velocity of money remains constant, a. what is the c...
The GDP growth rate is 8 percent and inflation is 4 percent. If the velocity of money remains constant, a. what is the change in real money balances? b. what is the change in money supply?
Describe two of the crucial assumptions made in the model of supply and demand, as discussed...
Describe two of the crucial assumptions made in the model of supply and demand, as discussed in your reader. What is your view of the supply and demand model, having worked with it for a few weeks?
7. Assume that output growth in the U.S. is 2%, money demand (L) is constant and...
7. Assume that output growth in the U.S. is 2%, money demand (L) is constant and money supply growth is 4%. Assume that output growth in China is 58, L is constant and money supply growth is 98. a. Assume that relative PPP and the quantity theory of money holds. What is the growth rate of the dollar-China exchange rate (AES/China)? b. What should money supply growth be in China if China wants to fix its currency to the dollar?...
Maintaining the growth of the money supply at a constant rate is an example of a O A. the gold standard. OB. an inflation targeting rule. O C. a money targeting rule. OD. discretionary policy. O E. a money demand rule.
Short Answers 1. (2 pts) What are the two assumptions when one applies the constant growth model to analyze stock prices? 2. (2 pts) HB Computer has just paid a dividend of $1 (DO) and the growth rate in dividend is expected to be 6% per year into the future. The company's required råte of return Ke is 12%. How much should investors pay for the growth of the company? (i.e., Estimate the value of growth for this company.)
7. Assume that output growth in the U.S. is 2%, money demand (L) is constant and money supply growth is 4%. Assume that output growth in China is 58, L is constant and money supply growth is 98. a. Assume that relative PPP and the quantity theory of money holds. What is the growth rate of the dollar-China exchange rate (AES/China)? b. What should money supply growth be in China if China wants to fix its currency to the dollar?...
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