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How come inflation does NOT increase if the money supply increases during a liquidity trap? My guess is that if people hold more cash, they would spend more. Given that during a liquidity trap the economy is maxed out and cannot increase output, the extra influx of spending would only serve as to increasing prices. Apparently this is not the case. What happens to the influx of cash? Do people simply hold it? EDIT: I found this, but it doesn't really make sense to me. "Conventionally, the expansion of the money supply will generate inflation as more money is chasing after the same amount of goods available. During a liquidity trap, however, increases in money supply are fully absorbed by excess demand for money (liquidity); investors hoard the increased money instead of spending it because the opportunity cost of holding cash—the forgone earnings from interest—is zero when the nominal interest rate is zero. Even worse, if the increased money supply is through LSAPs on long-term debts (as is the case under QE), investors are prompted to further shift their portfolio holdings from interest-bearing assets to cash."
Introduce and explain the concept of social welfare - define and describe the laws of demand and supply
q1. since 1981 the monetary authority of singapore mas has centered its monetary policy on the management of exchange
How would you Measure the Well-Being of a Person? How would you measure the Well-Being of a Nation? Would you be better off if I gave you money?
If the United States imports a specific product and exports a different product, what is the likely effect on the price of the product that the United States imports?
If you were macroeconomic policymaker, how do you balance the short-run trade off between inflation rate and unemployment rate? Explain. What is the historical relationship between rates of unemployment and inflation in the U.S. economy? What are the..
You are buying a house for $300,000. The terms of the mortgage include a 30-year loan (fixed rate) and annual interest rate of 4.5%, compounded monthly, and a 20% cash down payment is required. What are your monthly payments on this loan?
Explain how does the subsidy affect consumer surplus, producer surplus, tax revenue, and total surplus. Does a subsidy lead to a deadweight loss. Explain
Elucidate one opportunity for Big Drive Auto that requires a business management decision.
What is meant by culture of compliance. Is the concept applied consistently? In which countries or contexts does this arise? Is it likely to continue to be a factor in regulatory or ethical decisions? What can one do within an organization to foster ..
Gas prices are high at $3.30 in the Year of 2008, compared the prices in 1979 of gas prices for $1.00. Are Nominal prices or the Real Prices higher today, then in the past? How do you know? show your work. Use the CPI in 1979 of 85 and in 2008 of 218..
This case analysis should be written on "the economist" case provided in the additional material. Thank you custom-writing! No additional research is needed but any tables or graphs that are needed should go in the appendix with a max of 3 pages as e..
What if the monopolist charged P= $5.50 for the first 3 units of the commodity and P= $4 for the next 3 units What type of price discriminiation is this?
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