A. Discuss, with the help of diagrams, Friedman’s argument concerning the short and long-run effects of an increase in the money supply. B. Now discuss how his argument can be extended to study short and long-run effects of changes in the growth rate of a growing money supply. Both parts please.
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A. Discuss, with the help of diagrams, Friedman’s argument concerning the short and long-run effects of an increase in the money supply.
B. Now discuss how his argument can be extended to study short and long-run effects of changes in the growth rate of a growing money supply.
Both parts please.
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- What does the term exogenous money supply mean? a. The money supply is determined by external factors b. The money supply is controlled by households c. The money supply is determined by the central bank d. The money supply is determined by market forces.Consider a closed economy where the goods and money markets are described by the following relationships: C = 200 + 0.9(Y – T) 1 = 400 – 15r M = 200 + Y – 100r G = 150 T = 100 M = 2000 P = 2 Where Cis planned consumption, / is planned investment spending, Tis government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. Department of Economics a) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships. b) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). Compute also the level of consumption and investment spending in equilibrium and check whether the actual level of spending matches the equilibrium level of output.The economy is in a recession with high unemployment and low output.A. Identify an open-market operation that would restore the economy to its natural rate.B. Use a money market graph to illustrate the effect of this open-market operation. Show the resulting change in the interest rate.C. Use a graph similar to the one in part (a) to show the effect of the open-market operation on output and the price level. Explain in words why the policy has the effect that you have shown in the gra
- Suppose that the government decides to increase government expenditure. a) Is this a fiscal or a monetary policy? b) Is this an expansionary or a contractionary policy? c) How will the equilibrium output and interest rate change in goods and money markets, respectively. Explain using the diagrams.Assume an economy is currently operating at point A and answer the following questions. a) What can we draw from the knowing the position of point A to understand how the product market of this economy is performing and what is the state of the money market? Explain the reasoning for your answer.In the monetary intertemporal model, assume that money supply is always fixed. Suppose that there is an increase in real wage. How does this change affect interest rates (both real and nominal), price level, employment, total factor productivity and equilibrium output? Carefully explain your answers. b) Suppose that, in a liquidity trap, bank reserves are less liquid than government debt. If the Central Bank conducts an open market purchase of government debt, what is the effect on price level? Use an appropriate set of diagram to explain your answer.
- Consider the same economy as in the previous question with the supply of money fixed at $2000. Now suppose there is a shift in the money demand equation such that households in aggregate desire to hold an additional $150 in cash balances for any given level of interest rates. (a) Calculate the effect this has on the equilibrium interest rate (to two decimal places). (b) What would the central bank have to do to offset this effect?What is an open market operation? How can a central bank adopt an openmarket operation to increase the growth rate of her money supply? Usingrelevant Classical Theories, explain the long run effects on the inflation rateand nominal interest rate.Hello, I need help with a macroeconomics question. Thank you in advance! The answers are based on a short exerpt from the Federal Reserves press release from Feb 1, 2023 (attatchde below). 3. What decision did the committee reach regarding the federal funds rate? 4. What two tools would the Federal Reserve use to implement the decision from question 3? Be specific about the direction of the change for both tools.
- Assume that an economy is experiencing an economic contraction and the government decides to reduce taxes and increase government spending to stimulate the economy. By the way, Central Bank keeps money supply constant. i) Evaluate the effect of this policy on the a) Interest Rate , b)Money Demand (in the SHORT-RUN.) Explain and show your answer on the graph. ii)Evaluate the effect of this policy on output and price Level (in the LONG-RUN.) Explain and show your answer on the graph. Note : In figures, please label the axis and show the changes on the graphs using arrows.According to the IS-LM model, a. what happens to the interest rate, income, and investment when government spending decreases? b. how the Fed should adjust the money supply to keep income at its initial level. What happens to the interest rate as a result? c. If the Fed's goal is instead to hold the interest rate constant, explain in words how the Fed should adjust the money supply when government spending decreases. What happens to income as a result? d. What is the Fed's dilemma?Pls help with the below homework, select the correct option. Which of the following is NOT true in the monetary intertemporal model? A.When an economic agent buys some goods with a credit card, the economic agent acquires a debt with the bank that is paid off, at zero interest, at the end of the current period. B.The supply of money is determined by the central bank. C.Interest rates are determined by the government. D.Payments by credit card would work as an alternative to currency in transactions. E.The demand for money in the model will be determined by the behavior of the representative consumer and the representative firm.
