The effect of an increase in the growth rate of the money

Assignment Help Macroeconomics
Reference no: EM13321715

The Effect of an Increase in the Growth Rate of the Money Supply on the Interest Rate

As we have seen, in the long run, the average annual growth rate of real GDP for the United States has been about 3%, and the expected real interest rate on corporate bonds with Aaa ratings has averaged 2.8%. Suppose that the growth rate of velocity is 0%, and the growth rate of real GDP remains unchanged.

a. Use the Fisher equation to determine the value of the nominal interest rate on Aaa bonds if the money supply grows at an annual rate of 6%.

b. What will happen to the nominal interest rate in the long run if the growth rate of the money supply increases to 10%?

Reference no: EM13321715

Questions Cloud

What is total factor productivity : If the production function is Y = A K1/2L1/2 what is total factor productivity?
Graph the production function with capital on the horizontal : Graph the production function, with capital on the horizontal axis, and use your graph to explain the difference between a doubling of the labor force and a doubling of total factor productivity.
Describe how real gdp per capita has changed throughout the : Describe how real GDP per capita has changed throughout the world from 1820 to the present. 1.3 How is labor productivity related to the standard of living?
The effect of a decrease in the growth rate of the money : The Effect of a Decrease in the Growth Rate of the Money Supply
The effect of an increase in the growth rate of the money : The Effect of an Increase in the Growth Rate of the Money Supply on the Interest Rate
What is a store of value what types of assets act as a store : What is a store of value? What types of assets act as a store of value?
Why is the dollar not a hard asset : A New York Times column in the fall of 2009 reported that the value of the dollar was falling, in part, because “investors who had sought shelter in the American currency’s perceived stability
How does the money multiplier change when the nonbank public : How does the money multiplier change when the nonbank public decides to hold more currency relative to deposits?
Why is the value of the money multiplier typically greater : In April 2011, the money supply, as measured by M1, was approximately $1,917 billion. The monetary base was approximately $2,494 billion.

Reviews

Write a Review

Macroeconomics Questions & Answers

  The law of demand states that the demand for a product

The Law of Demand states that the demand for a product is inversely related to the price of such product. Therefore, the demand for a product is considered downward sloping. This implies that quantity demanded increases when price decreases. Is this ..

  Current and capital account balance

What is the amount of loans from rest of the world? What is the current account balance? What is capital account balance?

  Describe a govt policy that would result in an efficient out

One finding of the study is that theaters attract traffic, which adversely affects the community. The city planner estimates that the cost to the community from the extra traffic is $5 per ticket. What kind of an externality is this

  Revolution in an oil-exporting country

Which of the following will most likely be an unanticipated economic change and higher oil prices resulting from a revolution in an oil-exporting country such as Libya

  Detailed explanation of individual behavior

An internal study at Mimeo, revealed that much of its workers assembles 3 copiers per hour and is paid $3 for every assembled.

  Illustrate what the pricing and non pricing strategies

Illustrate what the pricing and non pricing strategies that firms rely on to compete in monopolistic competition and oligopoly market models.

  Utilizing demand and supply analysis to assist you

Utilizing demand and supply analysis to assist you, what are the effects on the exchange rate between the British pound and the Japanese.

  Should she quit her current job to become an entrepreneur

For the internet opportunity she anticipates costs for land labor and capitol of$ 3,250,000 per year as compared to revenues of $3,275,000 per year. Should she quit her current job to become an entrepreneur? If she does not quit her current job wh..

  What range of payments will the farmer accept

What are the highest and lowest payments from the writer that the beekeeper farmer team will accept for the sixth day Assuming that the beekeeper accepts Assuming that the beekeeper gets the amount,

  Business cycle and unemployment

What is business cycle? Describe the four phases of the business cycle. Where on the business cycle do you think the U.S. economy is today?

  Describe some theories or explanations of why

Describe some theories or explanations of why the crime rate fell in the 1990. Murders are now on the rise again.

  Demand curve elastic or inelastic at these points

Compute point elasticities at prices of 5 and 9. Is the demand curve elastic or inelastic at these points.

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