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The demand for real money balances is given by M/P = Y/i, where M is the quantity of money, P is the price level, Y is output, and i is the nominal interest rate which is measured in percent. At the beginning of the year, the nominal interest rate is 2%. Over the year, the monetary base increases by 3%, the money multiplier increases by 2%, the output increases by 2% percent, and the nominal interest rate increases by 2 BASIS POINTS. (a) If the ex ante real interest rate equals 1%, find the expected inflation rate at the beginning of the year. (b) Calculate the percentage change in the velocity of money. (c) [In answering this question, you are allowed to use the approximations regarding percentage changes; see page 4 of the math review (slide set 3).] Calculate the actual inflation rate. (d) Is it true that purchasing power was transferred from borrowers to lenders?
Presume there are two consumers, A and B. The utility functions of each consumer are given by: UA(X,Y) = X*Y UB(X,Y) = 2X + Y The initial endowments are: A: X = 4; Y = 2 B: X = 6; Y = 8. Is the initial allocation Pareto Efficient? What is the margina..
Suppose that Joe enjoys and repeatedly does stupid things like getting heavily into debt and insulting police officers. Do these actions constitute systematic errors? If he gets what he wants each time, are his stupid actions even considered to be..
The kinked demand curve describes price rigidity. Explain how the model works. What are its limitations? Why does price rigidity occur in oligopolistic markets?
Determine the current interest rate on the following securities, and explain why the interest rates are different for these different bonds.
The CigconsumpNE dataset contains the log demand price, and per capita income variables for the six New England states in wide format.
In the diagram draw the marginal social cost line that illustrates this. Add a marginal social benefit line that shows how the additional benefits of control decrease. Identify the optimal level of water quality. Suppose the government mandates co..
Go to Yahoo Finance to, in detail, review the trend lines for each of the foreign exchanges listed on the main page.
Explain the relationship between scarcity, choice and opportunity cost.
Assuming that the market for raw meat is perfectly competitive, what would be the impact of government policy that tightens requirements for quality control by farmers (compliance with the policy requires using additional equipment for the qual..
When choosing between bundles of beer and pizza, I always look first at the amount of pizza and choose the bundle with the largest amount of pizza. If any two bundles have the same amount of pizza
If Frank is maximizing profit what is the marginal revenue product of the last worker he hired? What is that worker''s marginal product?
Suppose the demand for a product is given by P=30 - 2Q. Also, the supply is given by P= 5+3Q. If a $5 per unit excise tax is levied on the buyers of a good, the deadweight loss created by the tax will be:
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