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%?
Homework Answers
The rate of growth of velocity of money = 0%. The rate of money growth = 4%.
A) Rate of spending growth = rate of growth of velocity of money + rate of money growth = 0% + 4% = 4%.
B) New rate of spending growth = 0% + 5.5% + 0.5% = 6%.
C) Long-run rate of real GDP growth = Total spending growth rate - rate of inflation = 6% - 4% = 2%.
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The figure below shows the growth in the money supply and average inflation rates for 160...
The figure below shows the growth in the money supply and
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countries, there is a one-to-one ratio between money growth and
inflation. For example, both the growth in the money supply and the
average inflation rate was close to 100% in Belarus.
Refer to the figure to answer the following questions.
1st attempt
Part 1 (1 point)
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The figure below shows the growth in the money supply and
average inflation rates for 160 countries from 1991–2011. For most
countries, there is a one-to-one ratio between money growth and
inflation. For example, both the growth in the money supply and the
average inflation rate was close to 100% in Belarus.
Refer to the figure to answer the following questions.
1st attempt
Part 1 (1 point)
See Hint
Consider the countries that lie on the line, which shows a
one-to-one...
Macroeconomics - Inflation rate
1. Chapter 5, Combined Model (4 points): Assume that real output is fixed at 500, consumption is fixed at С-350. government spending is fixed at G-60. ·Assume that the Investment function takes the following form 1(r) = 95-r, where r is given in percent terms (i.e., r-2 signifies an interest rate of 2%) » Assume that the quantity equation of money holds M-V- P.Y and the velocity of money is constant V (a) If the money...
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