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This question uses the general monetary model, where L is no longer assumed constant, and money demand is inversely related to the nominal interest rate. Consider the same scenario described at the beginning of the previous question.(Consider two countries: Japan and Korea. In 1996 Japan experienced relatively slow output growth (1%), while Korea had relatively robust output growth (6%). Suppose the Bank of Japan allowed the money supply to grow by 2% each year, while the Bank of Korea chose to maintain relatively high money growth of 12% per year). In addition, the bank deposits in Japan pay a 3% interest rate, i¥ = 3%.
a. Compute the interest rate paid on Korean deposits.
b. Using the definition of the real interest rate (nominal interest rate adjusted for inflation), show that the real interest rate in Korea is equal to the real interest rate in Japan.
c. Suppose the Bank of Korea increases the money growth rate from 12% to 15% and the inflation rate rises proportionately (onefor one) with this increase. If the nominal interest rate in Japan remains unchanged, what happens to the interest rate paid on Koreandeposits?
Explain how much and why. This could include things such as mergers, innovative marketing, etc. Illustrate what products and/or services that made by this company.
Suppose that business buy a total of $120 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. how much in revenues do businesses receive in the product market?
Illustrate graphically the effects of both policies on the market for cigarettes. In your discussion answer the following: Are these two programs at odds with the goal of reducing cigarette consumption?
The function for the net exports is NX=200-100e, where e, is the exchange rate, and the exchange rate is initially 1.0.
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Discuss within your Learning Team how and why the U.S.'s deficit, surplus and debt have an effect on the following
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First National Bank receives a deposit of $5,400. If there is no slippage, explain how much could the money supply expand.
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Explain how much does consumption change this year in absolute dollars as a result of a $5,000 annual tax cut to your income, if the tax cut.
As control variables, Quinn's data also includes income the individual earned in the month the data was collected, and the amount that it rained in the month the data was collected.
Then make an argument for why the government may still prefer using the other approach.
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