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Use the following information for the next 10 questions. You should draw a graph that depicts the situation below and use your picture to answer the questions. 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%.
1. After consumption and investment fall (and before Federal Reserve action), what is the inflation rate in your graph?
2. After Federal Reserve action, what is the growth rate of the velocity of money?
3. After Federal Reserve action, what is the real economic growth rate in your graph?
The fundamental forces of market self regulation are:
Your income has recently dropped from $60,000 per year to $45,000 per year. You have come to realize that you are only buying three bottles of wine a week now where as you used to buy six bottles of wine when you made $60,000 a year. Describe wine as..
Explain briefly whether each of the following would cause GDP to overstate or understate the degree of change in the broad standard of living:
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Elucidate how do your previous answers change in the special case where money demand does not depend on the expected rate of inflation
An appliance manufacturer produces two models of microwave ovens: H and W. Both models require fabrication and assembly work; each H uses four hours of fabrication and two hours of assembly, and each W uses two hours of fabrication and six hours of a..
If velocity ?(V) and aggregate output ?(Y) remain constant at $4 and $1,000 billion?, ?respectively, what happens to the price level ?(P) if the money supply? (M) declines from $425 billion to $350 billion?? Originally, what is the price level?
Add a relative demand schedule to your diagram that implies that Malaysia is incompletely specialized.
Cutting the corporate income tax can potentially increase the pace of technological change resulting in the aggregate supply curve shifting to the right.
How might you construct a measure of the "change in the price level" What additional information might you need to construct your measure.
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