User Account

All Pages

What is the equilibrium real interest rate

Assignment Help Macroeconomics
Reference no: EM131344759

Question -

Suppose the demand for Real Balances is given by the following equation:

1997_Figure.png = 1500 + 0.2Y - 10,000(r + πe).

Assume M = 4,000, P = 2, πe = .01 and Y = 5,000.

a. What is the equilibrium real interest rate? (It will be in decimal form. P and Y are given)

b. Show you results on a properly labeled Md/Ms diagram and label the equilibrium as point A.

c. Suppose Janet Yellen and Fed governors make statements and speeches to raise inflationary expectations to 4% and are successful. Solve for equilibrium real interest rate.

d. Show this equilibrium on your diagram and label as point B.

e. Why would they do this?

Reference no: EM131344759

Questions Cloud

Describe methods for increasing the awareness of the aup : Describe methods for increasing the awareness of the AUP, and other policies, within the organization. Critique the AUP you selected and provide recommendations for improving the AUP.
What is price-wage rigidity : What is price-wage rigidity? Do you agree with Keynes assessment that wage-price rigidity requires government's involvement in the markets? Why? Why not
What role do you play as a principal in recruiting teachers : EDUC 546- What role do you play as a principal in recruiting highly qualified teachers and staff? What would the value be in your school by increasing the number of minority teachers?
How might racism and prejudice impact his assimilation : Members of dominant ethnic and racial groups may assume that other groups' struggles are not their own or assume that those of a given race speak with one voice and react in the same way to their oppression. In reality, people can cope with racial..
What is the equilibrium real interest rate : What is the equilibrium real interest rate? (It will be in decimal form. P and Y are given) and Show you results on a properly labeled Md/Ms diagram and label the equilibrium as point A
Discuss about the mental health care : Mental health care is a primary concern to social workers, who are the main providers of care to populations with mental health diagnoses. The system that provides services to individuals with mental health issues is often criticized for being rea..
What laws govern arbitration in the us and in russia : What laws govern arbitration in the U.S.? In Russia? In your opinion, in which country should the dispute be handled? What are the advantages and disadvantages for Monarch Associates under the arbitration arrangement?
What levels of the hierarchy of controls : What levels of the hierarchy of controls are most applicable to system safety? Are any levels not useful when applying system safety? Provide one or more examples that support your response. Your response must be at least 75 words in length.
What affect should this policy mix have : In the early 1980s, the US government cut taxes and ran a deficit while the Fed pursued a tight monetary policy. What affect should this policy mix have

Reviews

Write a Review

Macroeconomics Questions & Answers

  Inflation targeting be a good policy

Why might it be difficult for the Fed to formally adopt inflation targeting?  Would inflation targeting be a good policy for the Fed in the present economic environment

  In using the taylor rule

In using the Taylor Rule as a guideline for monetary policy, what are the pros and cons of using forecasted values of inflation and output rather than observed values of these variables?

  Describe the present economic crisis situation in europe

Describe the present economic crisis situation in Europe.  Why has it been so difficult for the Europeans to find a solution to this problem?   Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..

  Long-term federal government budget problems

Question:. Explain why there are long-term Federal government budget problems. Explain why the base-line forecast of the CBO is misleading.

  Derive and compare demand curve

Question based on Derive and compare demand curve,  Derive Ambrose's demand function for peanuts. How does it compare with Johnny's demand curve for peanuts?

  Problem based on utility function

Problem based on  Utility Function - Problem,  Answer and explain the following using a diagram which is completely labeled.

  Laffer curve : tax rate and tax revenue

Question based on Laffer Curve : Tax Rate and Tax Revenue,  Do raising tax rates necessarily raise tax revenue? What factors affect how tax revenue changes when tax rates change?

  Problem - income elasticity of demand

Problem - Income Elasticity of Demand,  Interpret the following Income Elasticities of Demand (YED) values for the following and state if the good is normal or inferior; YED= +0.5 and YED= -2.5

  Positive balance of payment

Question Positive Balance of Payment: "Things will look good for the US if we could just get to where we are consistently running a positive Balance of Payments."

  Effect of recession on the investment curve

Comment on the effect of a recession on the investment curve (only) and on the level of savings, investment, and the equilibrium real interest rate in the financial crisis that hits United States first starting in fall 2007.

  Affect of falling domestic investment on trade surplus and

How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.

  Crises in the banking sector and bank run

Banking crises crisis decreases depositors' confidence in the banking system. What would be the effect of a rumor about a banking crisis on checkable deposits in such a country?

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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