8. A reduction in the marginal propensity to consume will cause an increase in the multiplier. 9. The money demand curve will shift to the right when a reduction in the interest rate will occur. 10. If the nominal interest rate 4% and expected inflation 4%, the expected real interest rate in year t is approximately 0%

8. A reduction in the marginal propensity to consume will cause an increase in the multiplier. 9. The money demand curve will shift to the right when a reduction in the interest rate will occur. 10. If the nominal interest rate 4% and expected inflation 4%, the expected real interest rate in year t is approximately 0%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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respond to the question with a concise and accurate answer, along with a clear explanation and step-by-step solution, or risk receiving a downvote. Please explain correct and incorrect option If real income rises 3 percent, price rises by 5 percent, nominal money demand rises by 7 percent, what is the income elasticity of real money demand (assuming nominal interest rate does not change)? A. less than or equal to 0.2 B. greater than 0.2 and less than or equal to 0.3 C. greater than 0.3 and less than or equal to 0.4 D. greater than 0.4 and less than or equal to 0.5 E. greater than 0.5 2. If the inflation rate is 8% and the real money demand grows at 2%, what is the nominal money supply growth? A. less than or equal to 5% B. greater than 5% and less than or equal to 7% C. greater than 7% and less than or equal to 9% D. greater than 9% and less than or equal to 11% E. greater than 11% 3. Which of the following statements correctly describes the IS-LM model? A. The FE curve is upward…
61. The total demand for money curve will increase (as a result of): A. if investors perceive less risk in the stock market and expect stock prices to increase causing investors to want to buy stocks. B. a decrease in nominal GDP. C. if investors perceive more risk in the stock market and expect stock prices to decline causing investors to want to sell their stocks. D. an increase in interest rates.
Using the Quantity Theory of Money, 1. Holding V constant, if M decreases by 2% and Y increases by 5%, then P must 2. These variable values would represent which scenario? Boom, Bust, Stagflation or Supply side expansion? 3. What curve would be the predominant shift in the aggregate demand and supply curve graph and in which direction would it shift?
a) Assume that the nominal return on U.S. government T-bills was 10% during 2002, when the rate of inflation was 6%. The real risk-free rate of return on theseT-bills was: b) When individuals believe they have sufficient income and assets to cover their expenses while maintaining a reserve for uncertainties, they are most likely in the phase of the investment life cycle. gifting B. consolidation C. accumulation D. spending c) Find the duration of a 3-year bond with annual coupon payments of $80 and a par value of $1,000. The current market price of the bond is $950.25. If the YTM of the bond dropped by 1%, what would happen to the bond price?
25. Suppose an economy exhibits a large unexpected decrease in productivity growth that lasts for a decade. However, monetary policymakers are slow to recognize that the change is to potential, not current, output and interpret the decrease in output as a recession that leads current to fall below potential output. In this scenario, policymakers believe that building and incorrectly respond by interest rates, sending the economy into a(n) pressures are gap. a. inflationary; raising; inflationary b. inflationary; reducing; inflationary c. inflationary; raising; recessionary d. recessionary; reducing; inflationary e. Not enough information is given.
For the economy described below: C = 2,800+ 0.5(YT) - 8,000r 8,000r IP = 2,000 G = 2,500 NX-0 T = 3,600 a. Suppose that potential output Y* equals 9,080. What real interest rate should the Fed set to bring the economy to full employment? You may take as a given that the multiplier for this economy is 2. Instructions: Enter all your responses as whole numbers. Real rate of interest: % b. Suppose that potential output Y' equals 7,800. What real interest rate should the Fed set to bring the economy to full employment? You may take as given that the multiplier for this economy is 2. Real rate of interest: % c. Show that the real interest rate determined in part a sets national saving equal to planned investment when the economy is at potential output. This result shows that the real interest rate must be consistent with equilibrium in the market for saving when the economy is at full employment. Planned investment P= National saving S=
Using the theory of liquidity preference what effect does an increase in the money supply has on the real interest rate Select one O a. An increase in the money supply shits the supply of real money balances to the right leading to an decrease in the interest rate to regain equitum OD an increase in the money supply has no effect on the interest rate because prices are still fed @cAn increase in the money supply shifts the demand for real money balances to the right leading to an increase in the interest rate to regain equarium O d. An increase in the money supply shifts the supply of real money balances to the right leading to an increase in the interest rate to regain equilibrium
QUESTION 19 According to liquidity-preference theory, in which circumstance would the money-supply curve shift left? a. if the interest rate increased b. only if the Bank of Canada chose to decrease the money supply c. if government spending decreased d. if the price level increased
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
10. Suppose that the equilibrium real federal funds rate is 2.5% and the target inflation rateis 2.5%. If the current inflation is 6.25% and the output gap is -2.3%, use the Taylorrule to find the federal funds rate that the Fed should choose. Show your work.
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