Solution-Central banks are independent of rest of government

Central banks are independent of rest of government

Reference no: EM132512384

1. Hyperinflations are extremely rare in countries whose central banks are independent of the rest of the government. Why might this be so?

2. Let's consider the effects of inflation in an economy composed of only two people: Bob, a bean farmer, and Rita, a rice farmer. Bob and Rita both always consume equal amounts of rice and beans. In 2010, the price of beans was $1, and the price of rice was $3.

a. Suppose that in 2011 the price of beans was $2 and the price of rice was $6. What was inflation? Was Bob better off, worse off, or unaffected by the changes in prices? What about Rita?

b. Now suppose that in 2011 the price of beans was $2 and the price of rice was $4. What was inflation? Was Bob better off, worse off, or unaffected by the changes in prices? What about Rita?

c. Finally, suppose that in 2011 the price of beans was $2 and the price of rice was $1.50. What was inflation? Was Bob better off, worse off, or unaffected by the changes in prices? What about Rita?

d. What matters more to Bob and Rita-the overall inflation rate or the relative price of rice and beans?

Reference no: EM132512384

Questions Cloud

Aggregate demand or supply during a recession : Should the government influence aggregate demand or supply during a recession (or during natural disasters, pandemics, wars)? Why? Should the government

Graph the current pandemic situation for a country : Graph the current pandemic situation for a country on the AD-AS model.

Short-run and long-run phillips curves : Using a correctly labeled graph with both the short-run and long-run Phillips curves and the relevant numbers from above, show the current long

Name two macroeconomic variables that decline : Name two macroeconomic variables that decline when the economy goes into a recession. Name one macroeconomic variable that rises during a recession.

Central banks are independent of rest of government : 1. Hyperinflations are extremely rare in countries whose central banks are independent of the rest of the government.

Explain how expectations affect consumption : 1. Explain how expectations affect consumption. 2. Explain how a change in expected future output could affect current output.

Complicate the conduct of monetary policy : In what way does the existence of near money complicate the conduct of monetary policy? How has the Federal Reserve responded to this complication?

Determines how often people go to the bank : According to the Baumol-Tobin model, what determines how often people go to the bank? What does this decision have to do with money demand?

Describe in words how demand or supply : Let's think about the market for loanable funds. One of its examples is the market for housing loans. Let's analyze how COVID 19 affects the market for housing

User Account

All Pages

Central banks are independent of rest of government

Reference no: EM132512384

Reference no: EM132512384

Questions Cloud

Reviews

Write a Review

Microeconomics Questions & Answers

How could government subsidize a producer

Find effect on wages in china describe the forces in terms

Monopolistic competition and oligopoly

How a firm can profit by restricting the quantity it sells

Approaches to help analyze consumer behavior

1bank z 10 rr assetsliabilities rr k200000deposits

Examine strategic manner in which leading company in the

What kind of market would describe the museum

What is the price elasticity of demand

Explains the rise of the indian motor industry

Computing firm fixed cost-variable cost and marginal cost

Exaggerate the firm''s profit or costs

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT