Suppose that the nominal interest rate is 4.2%, the real interest rate is 2.8%, real GDP...
Suppose that the nominal interest rate is 4.2%, the real interest rate is 2.8%, real GDP grows at 1%, and this year's money supply is $11.438B. To the nearest million, the size of next year's money supply will be $________B.
Homework Answers
As from fisher effect
i= r + π
π = inflation rate = 4.2-2.8 = 1.4%
So from growth rate version of Quantity Theory of money
%∆ in M + %∆ in V = %∆ in Y + π
%∆ in M =1+ 1.4 = 2.4%
assuming V is Constant
so M in next year = 11.438 + 11.438*.024
= $ 11.712512 B
Add Answer to:
Suppose that the nominal interest rate is 4.2%, the real
interest rate is 2.8%, real GDP...
Suppose that this year's money supply is $500 billion, nominal GDP is $10 trillion and real...
Suppose that this year's money supply is $500 billion, nominal GDP is $10 trillion and real GDP is $5 trillion. a. What is the price level? b. What is the velocity of money? (Please calculate your answers in billions, i.e. leave off the zeros (0) if necessary.) c. Suppose that velocity is constant and the economy's output of goods and services rises by five percent each year. What will happen to nominal GDP and the price level next year if the Fed...
Suppose that money supply is $4 trillion, nominal GDP is $20 trillion, and real GDP is...
Suppose that money supply is $4 trillion, nominal GDP is $20 trillion, and real GDP is $16 trillion. a. What is the price level? What is the velocity of money? Suppose that velocity is constant and the economy’s output of goods and services rises by 3 percent each year. b. What will happen to nominal GDP and the price level next year if the Fed increases the money supply by 5 percent? c. What money supply should the Fed set...
Suppose that this years money supply is $500 billion, nominal GDP is $6 trillion, and real...
Suppose that this years money supply is $500 billion, nominal GDP is $6 trillion, and real GDP is $2 trillion. a. What is the price level? What is the velocity of money? b. Suppose that velocity is constant and the economy's output of goods and services rises by 3% each year. What will happen to nominal GDP and the price level next year if the Fed keeps the money supply constant? c. What money supply should the Fed set next...
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?
Suppose this year’s money supply is $100, nominal GDP is $1500, and real GDP is $500....
Suppose this year’s money supply is $100, nominal GDP is $1500, and real GDP is $500. What is the price level? What is the velocity of money? What does this velocity of money mean?
3. Suppose that real GDP in 2017 was $250 million (measured in base year dollars) and...
3. Suppose that real GDP in 2017 was $250 million (measured in base year dollars) and nominal GDP in 2017 was $375 million (measured in current year dollars) in a small country. The money supply during this period was $125 million. a. Suppose that the money supply increased to $130 million in 2018. According to the Quantity Theory, what will the price level be in 2018 as a result of the money supply increase, all else equal? Also, what will...
Question 10 Suppose that in Macroland the growth rate of real GDP is 6%. The money...
Question 10 Suppose that in Macroland the growth rate of real GDP is 6%. The money growth rate is 10%. Suppose that the velocity is held constant, and that changes in the money growth rate do not affect the growth rate of real GDP. Also suppose that the real interest rate is 2%. If the quantity equation holds, what's the nominal interest rate? __% Answer:
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...
3. Suppose that prices are completely rigid, so that the nominal and the real interest rate...
3. Suppose that prices are completely rigid, so that the nominal and the real interest rate are necessarily equal. Money-market equilibrium is therefore given b L(r,Y). a. Suppose that government purchases increase, and that the central bank adjusts the money supply to keep the interest rate unchanged. i. Does the money supply rise or fall? ii. What happens to consumption and investment? b. Suppose that government purchases increase, and that the central bank adjusts the money supply to keep output...
The GDP deflator was 30 and real interest was 6.23% in 1990. And the nominal GDP...
The GDP deflator was 30 and real interest was 6.23% in 1990. And the nominal GDP in the same year was $993. While in 2010, the GDP deflator was 74 and real interest rate was 3.21%. What would be the value of the nominal 1990 GDP in the 2010 dollars?
3. Suppose that real GDP in 2017 was $250 million (measured in base year dollars) and nominal GDP in 2017 was $375 million (measured in current year dollars) in a small country. The money supply during this period was $125 million. a. Suppose that the money supply increased to $130 million in 2018. According to the Quantity Theory, what will the price level be in 2018 as a result of the money supply increase, all else equal? Also, what will...
Question 10 Suppose that in Macroland the growth rate of real GDP is 6%. The money growth rate is 10%. Suppose that the velocity is held constant, and that changes in the money growth rate do not affect the growth rate of real GDP. Also suppose that the real interest rate is 2%. If the quantity equation holds, what's the nominal interest rate? __% Answer:
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...
3. Suppose that prices are completely rigid, so that the nominal and the real interest rate are necessarily equal. Money-market equilibrium is therefore given b L(r,Y). a. Suppose that government purchases increase, and that the central bank adjusts the money supply to keep the interest rate unchanged. i. Does the money supply rise or fall? ii. What happens to consumption and investment? b. Suppose that government purchases increase, and that the central bank adjusts the money supply to keep output...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago