Money market with inflation and constant money supply growth, Macroeconomics

Assignment Help:

Q. Money market with inflation and constant money supply growth?

If πM = π and πe = π, both IS- and LM-curve will be fixed. 

2159_Money market with inflation and constant money supply growth.png

Figure: The money market with inflation and constant money supply growth

It is then likely to determine R* and Y *. We can also figure out the real interest rate as r = R - πe and πe is given. All variables are now concluded. As π and πW are exogenous, P and W are given over time (as long as we know W and P at one point in time). L is determined and we do not allow L to exceed LOPT as this would require a drop in real wages π > πW at least for a while. 

If, for instance πM< π, LM curve will glide upwards, R (and r) will increase whereas Y will fall. In a model with inflation, we characteristically consider changes in the growth of money supply, πM, instead of changes in the money supply itself when we discuss monetary policy.


Related Discussions:- Money market with inflation and constant money supply growth

Advantage and disadvantage of outsourcing, What are the pros and cons of ou...

What are the pros and cons of outsourcing in order to keep prices down?

Describe an algorithm which gives initial amount , This problem involves th...

This problem involves the question of computing change for a given coin system. A coin system is defined to be a sequence of coin values v1 (a) Let c ≥ 2 be an integer constant

Tariffs & quotas, the suitability of utilising a policy of tariffs and quot...

the suitability of utilising a policy of tariffs and quotas given the case of perfect competition.

Difference between sampling error and standard error, Which is not true of ...

Which is not true of the difference between sampling error and standard error? a. Standard error is a difference from the population. b. Sampling error can't usually be calcula

Graph of supply and demand, Draw the supply and demand graph for pizza, the...

Draw the supply and demand graph for pizza, then answer the questions below. SUPPLY OF AND DEMAND FOR PIZZA Quantity Supplied Price Quantity Demanded 300 $15.00 100 240 12.00 180 1

Equilibrium price falls and equilibrium quantity of goods, If equilibrium p...

If equilibrium price falls and the equilibrium quantity of the good purchased decreases, what has happened to either the supply curve or to the demand curve? a. Demand decreased

Equilibrium in money markit, equilibrium in money market and derivation of ...

equilibrium in money market and derivation of lm curve

MEC and MEI, MEC and MEI curvs and their role in economics

MEC and MEI curvs and their role in economics

Mankiw, Using the Mundell-Fleming model, describe how an increase in a coun...

Using the Mundell-Fleming model, describe how an increase in a country’s risk premium on the world interest rate can result in a higher level of real income. Under what circumstanc

Calculate profit-maximizing price and quantity, A monopolist faces the foll...

A monopolist faces the following demand function for its product: Q = 45 - 5P The fixed costs of the monopolist are $12 and the variable costs are $5 per unit. a) What are the pro

Write Your Message!

Captcha
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