suppose a country has perfectly interest elastic investment demand and low interest elasticity of money demand.Uesing...
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.
Homework Answers
Answer:
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 it will increase the interest rate.
It is decided by the market forces and the economic conditions while the interest rate targeting is set by the central bank .
The interest rate targeting is better option for the economy of this country as it will raise the social welfare
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suppose a country has perfectly interest elastic
investment demand and low interest elasticity of money
demand.Uesing...
Suppose we had a case in which the interest elasticity of both money demand and investment demand...
Suppose we had a case in which the interest elasticity of both money demand and investment demand were quite low. Would either monetary or fiscal policy be very effective? How would you interpret such a situation? 4.
Suppose we had a case in which the interest elasticity of both money demand and investment demand were quite low. Would either monetary or fiscal policy be very effective? How would you interpret such a situation? 4.
Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of money...
Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of money demand is zero. Suppose that the central bank increases the money supply by 10% and real income increases by 3%. Assuming that the real interest rate is 4%, what will be the equilibrium nominal interest rate? (a) 10%. (b) 11.6%. (c) 7.6%. (d) 12.4%.
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
(b) (5 Marks) The following figure illustrates the money demand and investment demand for the economies...
(b) (5 Marks) The following figure illustrates the money demand and investment demand for the economies of Argos and Spartak (subscipted A and s). Interest rate Interest rate STA 0 80 400 0 100 160 240 320 Quantity of money 20 40 60 80 Quantity of investment a) b) If the money supply is increased by $80 in both economies, what will be the new interest rate in Argus and in Spartak? What will be the increase in investment spending...
10. Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of...
10. Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of money demand is zero. Suppose that the central bank increases the money supply by 10% and real income increases by 3%. Assuming that the real interest rate is 4%, what will be the equilibrium nominal interest rate? (a) 10%. (b) 11.6% (e) 7.6%. (d) 12.4%
- Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against...
- Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the...
Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the...
Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate (on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the demand...
t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted...
t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than...
1. If the money demand does not depend on the interest rate, then the LM curve...
1. If the money demand does not depend on the interest rate, then the LM curve ______. a. is horizontal b. is vertical c. shifts up to the right d. shifts down to the right 2. If money demand becomes more income elastic, the LM curve will __________. a. become flatter b. shift to the right c. become stepper d. shift to the left 3. The labour force is defined as _________. a. the total number of working age individuals...
4) Suppose in the economy in the next couple years, bitcoin and other alternatives to money...
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Suppose we had a case in which the interest elasticity of both money demand and investment demand were quite low. Would either monetary or fiscal policy be very effective? How would you interpret such a situation? 4.
Suppose we had a case in which the interest elasticity of both money demand and investment demand were quite low. Would either monetary or fiscal policy be very effective? How would you interpret such a situation? 4.
(b) (5 Marks) The following figure illustrates the money demand and investment demand for the economies of Argos and Spartak (subscipted A and s). Interest rate Interest rate STA 0 80 400 0 100 160 240 320 Quantity of money 20 40 60 80 Quantity of investment a) b) If the money supply is increased by $80 in both economies, what will be the new interest rate in Argus and in Spartak? What will be the increase in investment spending...
10. Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of money demand is zero. Suppose that the central bank increases the money supply by 10% and real income increases by 3%. Assuming that the real interest rate is 4%, what will be the equilibrium nominal interest rate? (a) 10%. (b) 11.6% (e) 7.6%. (d) 12.4%
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Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate (on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the demand...
t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than...
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