Answer the following questions for a hypothetical economy whose situation in year 1 was as follows: M = $800 billion; long-term annual growth of real GDP = 3%; V = 4.

The banking system has no excess reserves and the reserve requirement is 10%.

Assume that V is constant and the economy is at full employment.

(a) What is the nominal GDP in year 1?

(b)If the Federal Reserve adheres to the monetarist rule of increasing the money supply by a constant 5% using open-market operations, explain whether it will have to buy or sell bonds and by how much between years 1 and 2 in order to meet the rule.

(c) Based on the information given above and calculated in (b) above, what will be the nominal GDP in year 2?

(d)Is this change greater or less than the change in real GDP? Explain.

 

Posted Date: 3/13/2013 2:25:27 AM | Location : United States

Ask an Expert

Related Discussions:- Calculate the nominal gdp, Assignment Help, Ask Question on Calculate the nominal gdp, Get Answer, Expert's Help, Calculate the nominal gdp Discussions

Write discussion on Calculate the nominal gdp
Your posts are moderated

Write your message here..

Related Questions

Decrease the nominal deficit, Which of the following will decrease the nomi... Which of the following will decrease the nominal deficit? A. An increase in taxes. B. An increase in the debt. C. An increase in government expenditures. D. An increase in interest

Taxation, what are the purposes of taxation? what are the purposes of taxation?

How commercial banks create money, How commercial banks "create money" ... How commercial banks "create money" Commercial banks obviously cannot influence the amount of currency in the economy or the monetary base, since they are not allowed to print

Gpd., the whole explanation of dpd the whole explanation of dpd

Geometric gradient series, Determine the present worth of a geometric gradi... Determine the present worth of a geometric gradient series with a cash flow of $50,000 in year 1 and increases of 6% each year through year 8. The interest rate is 10% per year.

Annual income from an apartment, The annual income from an apartment comple... The annual income from an apartment complex is $20,664. The annual expense is estimated to be $3,414. The apartment complex could be sold for $146,499 at the end of 10 years. If yo

Gdp of various components, What are prices indexes designed to measure? Out... What are prices indexes designed to measure? Outline how they are constructed. When GDP and other income figures are compared across time periods, explain why it is important to ad

Normal population standard deviation, A normal population has a mean of 12.... A normal population has a mean of 12.2 and a standard deviation of 2.5. A) Compute the Z value associated with 14.3. B) What proportion of the population is between 12.2 and 14.3.?

Corresponding future value, Calculate the present value P at time zero and ... Calculate the present value P at time zero and the corresponding future value F at the end of year three for a series of $15,000 payments to be made at the end of each of years one

Gross domestic product, In 1 to 2 sentences respond to the following commen... In 1 to 2 sentences respond to the following comment. "Cleaning your own house is not counted in gross domestic product because it does not represent economic production."