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In some country, the rate of inflation is expected to increase from 2 percent to 5 percent and people fear that the increase will be permanent if the central bank does not take action. Currently the nominal interest rate under control of the central bank is 4 percent and does not yet reflect the expected increase in inflation. Use a diagram for the real interest rate and the inflation rate to explain why it is likely that the central bank will have to increase the interest rate by a large amount. In both diagram and text, indicate clearly whether you deal with the real rate or with the nominal rate.
If such an increase in expected inflation as above is related to higher prices for food in a developing country where food prices are a big part of inflation, would you then change the analysis from part (a) and give a different recommendation to the central bank? Give one argument in favour of not increasing the interest rate by a large amount and one argument against.
Do you think that the long run equilibrium price of oil as world demand expands will behave in a fashion similar to the long run equilibrium price of motorcycles as world demand for them expands?
The EU is the biggest common market worldwide. Please name the most important facts that describe the size and importance of this market.
Why do you suppose that some publishers are selling space for advertisements in their e-books-- and sometimes even in physical books? From an economic standpoint, how could we explain the willingness of someone to pay 19.99 for a physical book that i..
If the fed begins shifting the ad curve rightward at a faster rate than in the past, the short-run effect is a
Elucidate how a recessionary output gap would emerge in an economy where long-run aggregate supply curve is persistently shifting to right.
Explain what a slope of .5 would mean if you were measuring the relationship between consumer spending and income, where the dependent variable is consumer spending and the independent variable is income? Explain what is meant when the slope of a lin..
Illustrate what do the nominal interest rate also the real interest rate that Whitney can earn. Whitney puts money in a savings account at her bank earning.
Suppose a company produces $5M worth of output and has sales of $2M each to domestic and foreign customers. It imports $1 M worth of raw material, pays its workers $3M in wages, pays its creditors $2M in interest, and has minus $1M in profits for its..
q1. the coase theorem suppose a firm pollutes a stream that has a recreational value only when pollution is below a
Suppose that the U.S. government decides to charge beer consumers a tax. Before the tax, 15 billion cases of beer were sold every year at a price of $7 per case. After the tax, 9 billion cases of beer are sold every year; consumers pay $10 per case (..
Elucidate how does a industry conclude its prices also the quantity of labor required in the resource marketplace during a specific period
The company’s MARR is 24% per year, compounded monthly. What is the maximum price Shockers Company should bid for PGP?
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