Part 2: M/P = C(1+i)/i Question: If people got square root utility from money, and square root utility from consumption, instead of log-log as above, what would the money demand function look like? Solve for it explicitly: M: Nominal Money Supply P: Aggregate Price Level

Give typing answer with explanation and conclusion    A standard "money demand" function used by macroeconomists has the form   ln(m)=β0+β1ln(GDP)+β2R,   Where m is the quantity of (real) money, GDP is the value of (real) gross domesticproduct, and R is the value of the nominal interest rate measured in percent per year. Supposed that β1 = 2.66 and β2 = −0.05.   A) What is the expected change in m if GDP increases by 4%?   The value of m is expected to_________(increase or decrease ) by approximately ________%   (Round your response to the nearest integer)   B) What is projected to change in m if the interest rate increases form 2% to 6% ?   The value of m is expected to ________(increase/decrease) by approximately ________%   (Round your response to the nearest integer)

Assume that the money demand function is (M / P)d = 2,200 – 200r, where r is the interest rate in percent. If the price level is fixed at P=2, and the Fed wants to fix the interest rate at 7 percent, it should set the money supply at: a. 2,000. b. 1,800. c. 1,600. d. 1,400.

According to the Quantity Theory of Money there is a direct relationship between money supply and inflation. In no more than 75 words, provide a brief and clear explanation of the precise quantitative nature of such a relationship.

Which of these assumptions does the Quantity Theory of Money depends on? Velocity of money is stable and GDP is at full employment. Real GDP depends upon the supply of resources and full employment is achieved. Real GDP depends upon the supply of resources and velocity of money is stable. There is government budget balance and trade balance in net exports.

(b) List one assumption of the quantity theory of money. Based on the simple quantity theory of money, what would be the impact on the economy of increasing the money supply by 5%?

Which one of the following is a correct sequence of events following a decrease in price level, assuming no change in government spending, taxes, and money supply? Group of answer choices Money demand decreases; interest rate decreases; and aggregate output decreases. Money demand increases; interest rate decreases; and investment increases. Money demand decreases; interest rate decreases; and aggregate output increases. Money demand increases; interest rate increases; and aggregate output decreases.

Which of the following is NOT implied by the Quantity Theory of Money (QTM)? a With constant money supply and output an increase of velocity creates an increase in price level. b If velocity is stable an increase in the money supply is accompanied by a proportional increase in nominal GDP. c With constant money supply and velocity an increase in output creates a proportional increase in price level. d If velocity is stable an increase in the money supply is accompanied by a proportional increase of price level when real output stays the same.

u10. Using the demand and supply schedule for money shown below, do the following: a)Graph the demand for and the supply of money curves. b)Determine the equilibrium interest rate. c)Suppose the RBA decreases the money supply by $5 billion. Show the effect in your graph and describe the money market adjustment process that is likely to follow. What is the new equilibrium rate of interest? Interest rate (%) Demand for money (billions of dollars) Supply of money (billions of dollars) 4 10 30 3 20 30 2 30 30 1 40 30

Within the classical form of the quantity theory, the demand for money is: Md = kPY   Where, Md = Money demand P = Prices Y = Income k = Proportion of nominal income (PY) that is demanded as cash-holding Suppose income (Y) is given at 400 units, and the money supply (M) is fixed at 200 units. Suppose (k) drops from its initial value of 0.5 to 0.25. Question: Explain the process that leads to the change in the price level.