Consumption and investment through monetary policy

Assignment Help Business Economics
Reference no: EM131101643

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%.

> 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?

Reference no: EM131101643

Questions Cloud

What would be the demand for corn : If a price of corn is $3.00 a bushel, 5000 bushels would be demanded. If the price rise to $4.00, 4000 bushels would be demanded. I know the elasticity is -0.778. If the price of corn rose $5.00 a bushel, what would be the demand for corn?
Firms price elasticity of demand and total revenue : The Energizer Bunny that "keeps on going and going" has been a very successful ad campaign for batteries. Explain the relationship between this slogan and the firm's price elasticity of demand and total revenue
The inflation rate and initially expected inflation : If the Fed raises the inflation rate and initially expected inflation does not change, in the short run the unemployment rate ________ the natural unemployment rate, and in the long run the unemployment rate ________ the natural unemployment rate.
The exante real interest rate equals : In 2015 the nominal interest rate is 6% and the general price level is $100. People expect the price level in 2016 to be $104 but it turns out to be $108. The ex-ante real interest rate equals:
Consumption and investment through monetary policy : 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. Assum..
When inflation expectations changed during : When inflation expectations changed during the 1967-1971 period, this change led to
The inflation-reduction episode : The inflation-reduction episode of the early 1980s was an example of an
What is the market equilibriumprice and quanity : The supply of measels vaccines is given by Q=450*P. The demand for measles vaccine is given Q=20,000-50*P. what is the market equilibriumprice and quanity? The demand curve implies that private willingness to pay is P=400-Q/50. Propose an interventio..
Developing economy with trade and liberalization : Alzuria is a developing economy, with trade and liberalization, the country has now seen substantial development in the private sector. However, government intervention in certain markets remains strong. The banking sector has a good mix of both priv..

Reviews

Write a Review

Business Economics Questions & Answers

  Capital goods costs phi units of the consumption good

Suppose the intermediation or capital goods costs phi units of the consumption good for each unit of capital intermediated (phi

  Without considering taxes and transactions costs

A no–load mutual fund had NAV per share of $23.00 on January 1. On December 31 of the same year the fund's NAV was $25.32. Income distributions were $0.85 and the fund had capital gain distributions of $1.65. Without considering taxes and transaction..

  Inflation tax on the holders of money

Suppose that a country’s inflation rate increases sharply. What happens to the inflation tax on the holders of money? Why is wealth that is held in savings accounts not subject to a change in the inflation tax? Can you think of any way holders of sav..

  Qassume a country the total holdings of banks were as

q.assume a country the total holdings of banks were as followsrequired reserves 45 millionexcess reserves 15

  Illustrate what are the likely consequences for future

illustrate what are the likely consequences for future economic growth in China and India

  Affects the ADI curve

State how each of the following affects the ADI curve, and EXPLAIN.

  Gas station is about to increase the price

Using the formula for β^1 and β^0, show what will happen to the estimator of the slope and intercept in the SLR model if y is multiplied by the constant k, and at the same time x is multiplied by the constant m.

  Monopolistic competition implies

As the name monopolistic competition implies, a firms decision in this setting will in certain ways resemble _____________ and in other ways resemble___________?

  Assume the cat food industry is perfectly competitve

Assume the cat food industry is perfectly competitve and is in long run equilibrium. suppose people start to take more cats than dogs as pets, what is the impact to the cat food industry and the individual firm in the short run and long run specifica..

  Although consumption spending

According to the lectures in class, although consumption spending is about 70% of the total spending in the US economy (C=70%, I=15%, G=15%) its effect is stronger than 70% on the economy why?

  Sale of product and the value of price elasticity of demand

If the price of X drops from $1 to 80 cents, and the quantity rises from 2,000 pounds purchased to 3,000 pounds purchased what can we say about the relationship between total revenue from the sale of X and the value of the price elasticity od demand?..

  Why the adverse effect on output is larger

Why the adverse effect on output is larger when the Fed is decreasing money supply than holding it constant.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd