Macroeconomics, Macroeconomics

Suppose that several months of data showed the CPI increasing at a 4.5% annual rate due largely to increases in the price of energy and food related commodities following several years when the CPI only increased by 1% per year. Suppose this increase causes investor expectations of annual inflation to also increase from 1% to 4.5%. Assume, at the same time that fears of higher inflation creates concerns that rising interest rates will derail the economic recovery and lead to another recession. Assume the resulting increase in risk aversion among investors drives the expected real rate of return required to equate investor demand to the existing supply of 1 year Treasury notes down to 0.5 % from 2%. What would you expect to happen to the nominal yields on 1-year T-notes during the period over which these changes in inflation expectations and required real yields occurred?
Posted Date: 2/24/2013 1:48:54 PM | Location : United States







Related Discussions:- Macroeconomics, Assignment Help, Ask Question on Macroeconomics, Get Answer, Expert's Help, Macroeconomics Discussions

Write discussion on Macroeconomics
Your posts are moderated
Related Questions
The economy of Macroland has a balanced budget with fixed government expenditures G = 150 and T = 150. Investment is autonomous: I = 200. The consumption function is the foll

process to calculate gross domestic product We just include finished goods and services - which is, anything that is sold directly to consumer. Electric power sold to a steel m

(A) What is the difference between a movement along a demand or supply curve and a shift of one of these curves? Why is it important to distinguish between the two? What mistake

Private sector in the circular flow The private sector total income is known as the national income. Because private sector receives the entire return from the factors of pr

Suppose gasoline and hybrid vehicles are substitutes. Draw a graph indicating what will happen in the market for hybrid vehicles if the price of gasoline increases. Be sure to labe

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.

The price of gasoline has recently come down as has the quantity. Show graphically and explain what might have caused this.

Suppose an advertising agency is conducting a survey concerning the effectiveness of commercials during the Super Bowl. If 32% of people watch the Super Bowl, and if the agency con


Consider the market for the trusty widget (the most common good in the world if economics textbooks are to be believed). Assume that the market is perfectly competitive. Suppose th