Question

Monetarist problem The money market is initially at equilibrium at Y/V = M/P : Y =60,...

Monetarist problem The money market is initially at equilibrium at Y/V = M/P : Y =60, V= 10 and M = 120, P = 20 Suppose the economy experiences real growth of 5% and inflation rises by 4% ; assume velocity of money holds constant. • How much should the CB raise the money supply to get the money market back to equilibrium? i • Why does the CB seldom succeed in getting the economy back to monetary equilibrium quickly? I would also graphs to explain my answer

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The money market is initially at equilibrium at Y/V = M/P : Y =60, V= 10...
The money market is initially at equilibrium at Y/V = M/P : Y =60, V= 10 and M = 120, P = 20 Suppose the economy experiences real growth of 5% and inflation rises by 4% ; assume velocity of money holds constant. How much should the CB raise the money supply to get the money market back to equilibrium? and Why does the CB seldom succeed in getting the economy back to monetary equilibrium quickly?
Assume the real money demand function is L(Y;i)=2000+0.3Y-5000i where Y is real output, P is the...
Assume the real money demand function is L(Y;i)=2000+0.3Y-5000i where Y is real output, P is the price level, i is the nominal interest rate on non-monetary assets and monetary assets earn no interest. a) Assuming that the asset market is in equilibrium at i=0.05. Find equilibrium levels of real money supply, nominal money supply, and the velocity of money if P=100, and Y=2000. b) Find the real income elasticity of money demand at the equilibrium level of money balances found...
1 Assume that the demand for real money balance (M/P) is M/P = 0.6Y – 100i,...
1 Assume that the demand for real money balance (M/P) is M/P = 0.6Y – 100i, where Y is national income and i is the nominal interest rate (in percent). The real interest rate r is fixed at 3 percent by the investment and saving functions. The expected inflation rate equals the rate of nominal money growth. a. If Y is 1,000, M is 100, and the growth rate of nominal money is 1 percent, what must i and P...
Money demand is M^d=P*(100+0.06*Y-100i), where Y=2000, r=4%, expected inflation rate =1%. If the money supply is...
Money demand is M^d=P*(100+0.06*Y-100i), where Y=2000, r=4%, expected inflation rate =1%. If the money supply is 1075, what is the equilibrium price that clears the asset market?
2. Assume that the equilibrium in the money market may be described as M/P = 0.5Y...
2. Assume that the equilibrium in the money market may be described as M/P = 0.5Y – 100r, and M/P equals 800. this is one question unfortunately. Write the LM curve two ways, expressing Y as a function of r and r as a function of Y. What is the slope of the LM curve? If real money balance M/P increases to 1200, what is a new LM curve? Graphically illustrate LM curve from part a and new LM curve...
Assume that the real money balance (M/P) is M/P=0.6Y-100i, where Y is the national income and...
Assume that the real money balance (M/P) is M/P=0.6Y-100i, where Y is the national income and I is the nominal interest rate. The real interest rate "r" is fixed at 3 percent by the investment and saving functions. The expected inflation rate equals the rate of nominal money growth. -If Y is 1,000, M is 100, and the growth rate of nominal money is 2.5%, what must "i" and "P" be? -If Y is 1,000, M is 100 and the...
Consider the closed-economy model. (a) Suppose the economy is initially in long-run equilibrium with Y =...
Consider the closed-economy model. (a) Suppose the economy is initially in long-run equilibrium with Y = Y¯ , r = ¯r, and P = P1. Draw IS-LM and AD-AS diagrams showing this equilibrium. (b) Suppose the economy is then hit by an adverse supply shock, which causes P1 to jump up to P2 > P1. Using Keynesian cross and money market diagrams, explain what will happen to the IS and LM curves in the short run as a result of...
1. Recall the classical economists and one of their favorite theories: the quantity theory of money...
1. Recall the classical economists and one of their favorite theories: the quantity theory of money and monetary neutrality. The theory is expressed as an equation as follows: M x V = P x Y. What does V stand for? a. the value of the domestic currency b. the velocity of money c. the virtual reality of the universe d. the velocity of investment spending in the economy 2. Following up on question 1 above, what does Y represent? a....
Suppose the demand for real money balances is Md/P = L(Y, i), where L(Y, i) is...
Suppose the demand for real money balances is Md/P = L(Y, i), where L(Y, i) is an increasing function of income Y and a decreasing function of the nominal inter- est rate i. Assume that the interest elasticity of money demand is infinite when the nominal interest rate is zero. Money-market equilibrium is represented by the equation Ms/P = L(Y, i), where Ms is the money supply controlled by the central bank and P is the price level. The LM...
Suppose that the money demand function takes the form (M/P)d = L (i, Y) = Y/(5i)...
Suppose that the money demand function takes the form (M/P)d = L (i, Y) = Y/(5i) a. If output grows at rate g and the nominal interest rate is constant, at what rate will the demand for real balances grow? b. What is the velocity of money in this economy? c. If inflation and nominal interest rates are constant, at what rate, if any, will velocity grow? d. How will a permanent (once-and-for-all) increase in the level of interest rates...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT