If the velocity of money is constant, money supply increases by 5%, output growth rate is 3%, and nominal interest rate is 5% then real interest rate is

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Q: In country Superland, its real GDP grows by 5% per year and its money stock grows by 12%, the…

A: "According to the quantity theory of money, if velocity of money is constant then inflation rate is…

Q: When the interest rate falls , other things remaining the same, what change occurs in the market for…

A: Money demand shows the various quantity of money demanded at various interest rate.  When interest…

Q: explain what may be the short-term economic consequences of a decrease of the interest rate by the…

A: Macroeconomics is the branch of economics that studies how an economy functions as a whole.…

Q: What is the benefit of holding cash? Group of answer choices Cash appreciates over time. The…

A: Cash is the physical currency issued by the central bank to make transactions and it is widely…

Q: The measures the opportunity cost of holding money. short-term nominal interest rate short-term real…

A: Opportunity Cost is the value of next best alternative sacrificed for the consumption of given good.…

Q: Which of the following statements about the income velocity of money (V) is NOT correct? a. It is an…

A: The income velocity of money (V) is defined as the number of times per year that a unit of currency…

Q: Faced with an instability of economic growth caused by a recession or accelerated inflation, the Fed…

A: In addition to open market operations, the other monetary policy tools used by the Fed to control…

Q: Judy runs a bank and believes interest rates will increase in the future. Explain what size interest…

A: The gap between the interest receiving assets and the interest rate paid liabilities are called…

Q: "In the framework of intertemporal choice theory, how does the introduction of a perfectly…

A: The issue here is the way perfectly anticipated inflation influences the consumption-saving choice…

Q: How does inflation affect the real return on holding cash?

A: A country's price level rising beyond its limit is referred to as inflation. It is caused by…

Q: The Central Bank can reduce inflation and stimulate growth simultaneously by lowering interest…

A: Inflation is the scenario where there is a rise in the general price level of goods and services…

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A: In financial matters, the marginal propensity to consume is a metric that evaluates prompted…

Q: Explain how the GDP and the interest rate are related to the transactions and asset demands for…

A: Demand for money: It means the total amount of money that is wanted to be held by the population of…

Q: Explain using examples why firms might take actions leading to reductions in employment when the…

A: One of the most crucial instruments of monetary policy is the interest rate that the central bank…

Q: 23. An understanding of the state of the economy, projections on economic growth, the floor…

A: With understanding of the macro economic picture with respect to economic structure, business…

Q: Assume that the money demand function is (M/P)^d= 2200 – 20000i, where i is the interest rate. The…

A: At equilibrium, real money demand is equal to real money supply. Therefore, at equilibrium, MPd=MP…

Q: Financial institutions such as banks pays lower interest rates to depositors and charge higher…

A: Democratic government is a type of government in which there is both public and private sector…

Q: Question 3 In the country of Bithynia, the velocity of money grows at 10 percent per year. The…

A: We know that as per the Quantity Theory of Money, MV = PY Where M is the Money SupplyV is the…

Q: The speculative demand for money is...    A. positively related to interest rates.    B.…

A: Speculative Demand for Money : The speculative demand for money is the demand for money when the…

Q: The claim that increases in the growth rate of the money supply increase nominal interest rates but…

A: The objective of the question is to identify the economic theory that states that increases in the…

Q: Monetary policies as instruments to promote economic growth Read the following premise carefully…

A: Monetary policies are the policies established by the central bank of the country. The Federal…

Q: 1. Why would an investor be willing to take a greater risk? 2. What is the impact of inflation on…

A: The chance which portrays that actual gains in investment would tend to differ from an expected…

Q: Suppose that the Price level = 115, Supply of Money = $60 billion, and Real GDP = $12 billion. What…

A: Velocity of money: The velocity of cash is an estimation of the rate at which cash is traded in an…

Q: Other things equal, if the demand for money becomes more elastic, then the LM curve will become…

A: The increased demand for cash moves the LM curve up. This happens in light of the fact that at some…

Q: According to the classical theory of money, inflation does not make workers poorer because wages…

A: Inflation is the overall increase in the price level in an economy during a particular period of…

Q: Using the macroeconomic environment of a bank describe the effect that this environment will have on…

A: The macro-environment alludes to how the macroeconomic circumstances in which an organization or…

Q: The money growth rate is currently 3%, the real GDP growth rate is 5%, and the real interest rate is…

A: Here, given information is: Money growth rate: 3% Real GDP growth rate: 5% Real Interest rate: 0%

Q: Using monetary policy to raise the real interest rate leads to an ______ in investment spending and…

A: Using monetary policy to raise the real interest rate leads to an decrease in investment spending…

Q: The multiplier is an indication of the capacity of money injected in the economy to    a. increase…

A: The economics as a study is based upon the basic idea of scarcity. The resources which are present…

Q: a) In the long run, the real interest rate is determined by and, in the short run, the Reserve Bank…

A: Taking into the effect of inflation, the relationship between nominal interest rate and real…

Q: If output is below full emplc True O False

A: when output exceeds full employment then, in that case, the actual rate of unemployment is less than…

Q: For a country A, the nominal GDP growth rate is 10 percent and inflation is 4 percent. If the…

A: According to QTM (Quantity theory of money), it is an identity showing relationship between output…

Q: As the nominal interest rate increases ________. Select one: a. the opportunity cost of holding…

A: Meaning of Opportunity Cost: The term opportunity cost refers to the situation under which the…

Q: The demand for liquid cash in the economy is based on _____________ Select one: a. Interest rates…

A: Answer: c. All of the above Demand for money is desired for holding financial assets in the form of…

Q: New concepts like stablecoins, central-bank digital currencies, NFTs, really calls into question the…

A: Many individuals are forced to contemplate the future of money and currency as more people rely on…

Q: In the Country A, the velocity of money is constant. The growth rate of real GDP is by 6% per year,…

A: According to Fisher's quantity theory of money, there is a direct relationship between the quantity…

Q: Which of the statements is wrong? Money supply increase leads to decrease in interest rate Decrease…

A: We have given four statements, out of which we have to select the wrong statement.

Q: Question 5 - Policy Questions 1) If the rate of money growth increases, in the long run money demand…

A: LR and SR economy: LR and SR concepts are very different in macroeconomics. In the SR, the economic…

Q: Based on the money market model, when real GDP increases, the equilibrium interest rate should…

A: An equilibrium interest rate will be determined at the intersection between the supply and demand of…

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A: In a market, capital is the term that is used to define the assets requited for making operating…

Q: None

A: To find the quantity of money supplied for the money market equilibrium, we can use the equation of…

Q: An increase in the expected rate of inflation will           the expected return on bonds relative…

A: Expected Inflation:Expected inflation refers to the anticipated increase in the general price level…

Q: Question 1-5. Answer True, False or Uncertain. Briefly explain your answer.

A: Introduction 1. International Economics is the study of economic interactions between countries.…