Homework Answers
1) If expected inflation is constant then a fall in nominal interest rate will reduce real rate of interest because nominal interest rate = inflation rate + real interest rate
Option B is correct.
2) If there is a surplus of money, there would be less demand of money than supply of it. People will buy assets with high interest to reduce the rate of interest. Option B is correct.
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If expected inflation is constant, then when the nominal interest rate falls, the real interest rate...
36. According to liquidity-preference theory, why is the g? money-demand curve downward slopin a. because interest...
36. According to liquidity-preference theory, why is the g? money-demand curve downward slopin a. because interest rates rise as the Bank the qua b. because interest rates fall as the Bank of Canada reduces the supp c. because people will want to hold less money as the cost of doing so d. because people will want to hold more money as the cost of doing rest rates fall as the ofCanada reduces the quantity of money demanded anada reduces the...
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...
10. The real interest rate is the (x) real rate of return to the lender. (y)...
10. The real interest rate is the (x) real rate of return to the lender. (y) real cost of borrowing to the borrower. (z) nominal interest rate plus the rate of inflation. A. (x), (y) and (z) B. (x) and (y) only C. (x) and (z) only D. (y) and (z) only E. (z) only 13. If there is a shortage of loanable funds, then A. neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity...
If the nominal interest rate is the same as the real interest rate, then inflation must...
If the nominal interest rate is the same as the real interest rate, then inflation must be: -higher than the nominal rate of interest. -zero. -lower than the nominal rate of interest. -negative. Assume that $1.6 million is deposited into a bank with a reserve requirement of 5 percent. What is the money supply as a result? If the government decides to raise the reserve requirement to 10 percent, what is the value of the money supply in this case?
If the nominal interest rate is below the equilibrium value, then the quantity demanded of money...
If the nominal interest rate is below the equilibrium value, then the quantity demanded of money is ______ than the quantity supplied of money, bond prices will ____, and the nominal interest rate will ____. greater; fall; increase greater; fall; decrease greater; rise; increase less; fall; increase
When the nominal interest rate is____ the equilibrium interest rate, the quanity of money demanded is...
When the nominal interest rate is____ the equilibrium interest rate, the quanity of money demanded is less than the quanity of money supplied; when the nominal interest rate is______ the equilbrium interest rate, the quanity of money demanded exceeds the quanity of money supplied A) greater than; less than B) greater than; equal to C) less than; greater than D) equal to; greater than
What is the real interest rate if the nominal interest rate is still 8% but inflation...
What is the real interest rate if the nominal interest rate is still 8% but inflation is 1%? Does it cost more or less to borrow than when inflation was 3%?
1.) Using the above figure, if the price level increases the equilibrum interest rate rises and...
1.)
Using the above figure, if the price level increases
the equilibrum interest rate rises and the equilibrium quantity
of money rises
the equilibrium interest rate rises and the equilibrium quantity
of money falls
the equilibrium interest rate rises and the equilibrium quantity
of money stays the same
the equilibrium interest rate falls and the equilibrium quantity
of money falls
the equilibrium interest rate falls and the equilibrium quantity
of money stays the same
2.)
The demand for money is...
Question 1 1.7 pts Whenever the expected inflation rate is positive The real interest rate is...
Question 1 1.7 pts Whenever the expected inflation rate is positive The real interest rate is negative O the real interest rate is greater than the nominal interest rate O The nominal interest rate must be equal to the real interest rate The real interest rate is positive O None of the above
Suppose the real interest rate is 3% and expected inflation is 3%, what is the nominal...
Suppose the real interest rate is 3% and expected inflation is 3%. What is the nominal interest rate?nominal interest rate: = _______ %All else equal, if inflation decreases by 0 %, what will happen to the nominal interest rate?The real interest rate will decrease by 0 %.The nominal interest rate will decrease by 0 %.The nominal interest rate will increase by 0 %.The real interest rate will increase by 0 %.What do economists call the relationship between the nominal interest...
36. According to liquidity-preference theory, why is the g? money-demand curve downward slopin a. because interest rates rise as the Bank the qua b. because interest rates fall as the Bank of Canada reduces the supp c. because people will want to hold less money as the cost of doing so d. because people will want to hold more money as the cost of doing rest rates fall as the ofCanada reduces the quantity of money demanded anada reduces the...
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...
1.)
Using the above figure, if the price level increases
the equilibrum interest rate rises and the equilibrium quantity
of money rises
the equilibrium interest rate rises and the equilibrium quantity
of money falls
the equilibrium interest rate rises and the equilibrium quantity
of money stays the same
the equilibrium interest rate falls and the equilibrium quantity
of money falls
the equilibrium interest rate falls and the equilibrium quantity
of money stays the same
2.)
The demand for money is...
Question 1 1.7 pts Whenever the expected inflation rate is positive The real interest rate is negative O the real interest rate is greater than the nominal interest rate O The nominal interest rate must be equal to the real interest rate The real interest rate is positive O None of the above
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