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Assume that wages and prices are sticky and that we start at a long run equilibrium. Assume that at this initial point, the growth rate of the money supply is 6%, the growth rate of the velocity of money is 5% and that the real economic growth rate is 4%. Assume that there is a drop in consumption and investment such that causes total spending growth to drop by 5%. Assume now that the Federal Reserve is going to try and counter this drop in consumption and investment through monetary policy, and that they increase the growth rate of the money supply by 9%.
After consumption and investment fall (and before Federal Reserve action), what is the inflation rate in your graph?
After Federal Reserve action, what is the growth rate of the velocity of money?
After Federal Reserve action, what is the real economic growth rate in your graph?
Suppose you read in the newspaper that all last week the Fed conducted purchases in open market, and that on Tuesday of last week it lowered the discount rate.
A recessionary expenditure gap in a mixed open economy can be measured as the extent to which cumulative expenditures
The set-up cost per lot is estimated to be $40, and the manufacturing cost has been established at $5.20 per unit. Interest, insurance, taxes, space, and other holding costs are $3.10 per unit per year. Calculate the economic manufacturing quantit..
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Paul Schumer and Jim Miller, two analyst at a research institute, discuss the rising costs of higher education in their country. Paul feels that escalating tuition fees in colleges and universities are indicative of a bubble in the higher education m..
What effects would each of the following have on aggregate demand or aggregate supply, other things equal? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output, assuming that the price le..
Based on standard monetary theory, if the Fed purchases Treasury Bills from banks:
A 50-kilowatt gas turbine has in investment cost of $40,000. It costs another $14,000 for shipping, insurance, site preparation, fuel lines, and fuel storage tanks. The operation and maintenance expense for this turbine is $450 per year. Additionally..
A firm uses labor and capital to produce output according to the production function q=100KL, where L is the number of units of labor used and K is the number of machines. What is the marginal product of labor. What is the marginal product of capital..
Money Definitions. To answer the following questions, refer to the money definitions and relationships 1: Total currency = (currency in circulation) + (vault cash) 2. Total reserves = (vault cash) + (reserve deposits) 3. Monetary Base (MB) = (currenc..
The Gentle Warming Company is purchasing a new cooling system. To pay for the system, the company agrees to make 12 installment payments of $8186 per year, beginning at the end of year 1.
Read "Attitudes of the Industrial Middle Class in Britain and Japan" (19-1d). What are the differences between the viewpoints of Samuel Smiles and Shibuzawa Eiichi? How do you account for those differences? Do they share any values or outlooks?
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