Reference no: EM13819141
Use the following information for the next 7 questions. You should draw a graph that depicts the situation below and use your picture to answer the questions.
Assume that wages and prices are sticky and that we start at a long-run equilibrium. Assume that at this initial point, the growth rate of the money supply is 4%, the growth rate of the velocity of money is 9% and that the real economic growth rate is 5%.
Assume that there is a drop in consumption and investment such that it causes total spending growth to drop by 6%.
Assume now that the federal government is going to try and counter this drop in consumption and investment through fiscal policy by increasing government spending. Assume that that there is a multiplier and no crowding out. Assume the federal government gets its fiscal policy just right (including the multiplier).
1. What is the inflation rate at the initial long-run equilibrium (the point where we start)?
2. When consumption and investment fall, the _____ curve shifts _____.
3. After consumption and investment fall (and before federal government action), what is the inflation rate in your graph?
4. When the federal government decides to increase government spending, the ______ curve shifts ______.
5. After the increase in government spending, but before the multiplier kicks in, the AD curve is ______ the original AD curve.
6. After the multiplier kicks in, what is the growth rate of the money supply?
7. After the multiplier kicks in, what is the real economic growth rate?
|
Dealership in general give better prices-large scale buyer
: Tom Reardon and his next door neighbor, Rich O’Donnell were carpooling to work one morning when the engine of Tom’s car started to sputter. This started a chain of events that eventually led Tom to decide that he needed a new car. Why do dealerships ..
|
|
Regarding the accumulation of power
: Which of the following statements is least true regarding the accumulation of power?
|
|
The chamber of commerce luncheon
: The guest speaker sat down to a warm round of applause. Jim Hoffman was a well-known local consultant with a seemingly unlimited repertoire of humorous stories and anecdotes. And his subject, “The Dangers of New Product Introductions” always went dow..
|
|
What is the real growth rate in felixs salary
: Felix Jones, a recent engineering graduate, expects a starting salary of $65,000 per year. His future employer has averaged 5% per year in salary increases for the last several years. If inflation is estimated to be 4% per year for the next 3 years, ..
|
|
What is the inflation rate at initial long-run equilibrium
: Assume that wages and prices are sticky and that we start at a long-run equilibrium. Assume that at this initial point, the growth rate of the money supply is 4%, the growth rate of the velocity of money is 9% and that the real economic growth rate i..
|
|
Economist states that she believes the federal reserve
: Assume that an economist states that she believes the Federal Reserve should ensure that nominal GDP grows by 5% every year and that is all the Federal Reserve should do. Which of the following is true about this economist?
|
|
Wages-prices are completely and immediately flexible
: Assume that wages and prices are completely and immediately flexible. Assume that oil prices increase in the United States.
|
|
What is the required return of the stock
: The firm, Beta, is under a bad management such that the dividend payment is expected to decrease at a rate of 4% per year. Suppose the recent dividend payment is $3 per share and the stock price is $30. What is the required return of the stock? If no..
|
|
Calculate the coupon rate of the bond
: A coupon bond has a face value of $1,000 and maturity 5 years. The required rate of return for the bond is 5%. The bond is sold at a price of $1,000 now. Calculate the coupon rate of the bond. Year by year, calculate the current yield and the capital..
|