User Account

All Pages

What is the equilibrium interest rate

Assignment Help Macroeconomics
Reference no: EM132606727

Use the following information to answer the next four questions. Each multiple choice question is worth 3 points. 

mm = money multiplier = .8

MB = monetary base = 2500

Money Demand: Md = P X [ a0 + .5 (Y) - 200 (i) ]

where: a0 = 800, Y = 4000

For simplicity we hold the price level fixed at 1 and assume that inflationary expectations are fixed at 2%. Y is also held constant in this problem.

A) What is the equilibrium interest rate (i)?

B) Suppose a0 falls to 600. What is the new equilibrium interest rate?

C) Suppose that the Fed wanted to keep interest rates constant at their initial level (the value you found in A). What would the Fed have to do in terms of open market operations to achieve this?

D) Given the interest rate you found in B, what is the ex-ante real interest rate?

Reference no: EM132606727

Questions Cloud

Explain the concept of ricardian equivalence : Use a two-periodmodel with a government to explain the concept of Ricardian equivalence. Please explain and show graphically
How policymakers can stimulate the economy : What detail can be provided on both fiscal and monetary policy and how policymakers can stimulate the economy.
Health services organizations : Health services organizations are no different from most other organizations. State whether you agree or disagree with this statement
Difference between top-down and bottom-up budgeting : Explain the difference between top-down and bottom-up budgeting, and give the pros, and cons of each.
What is the equilibrium interest rate : Use the following information to answer the next four questions. Each multiple choice question is worth 3 points.
Organization development practitioners : Does your organization use the talents of Organization Development (OD) practitioners?
Explain how trading between countries makes them better-off : Explain how trading between countries makes them better-off? Describe the opportunity cost each country gives up by trading with each other?
Explain what incentives the chosen market system : What circumstances would force firms within the selected market to likely produce more, or less, of a good or service?
The role of managers and technology : The role of managers and technology, Deficiencies in clinical use of technology, Technology and medical errors.

Reviews

Write a Review

Macroeconomics Questions & Answers

  Inflation targeting be a good policy

Why might it be difficult for the Fed to formally adopt inflation targeting?  Would inflation targeting be a good policy for the Fed in the present economic environment

  In using the taylor rule

In using the Taylor Rule as a guideline for monetary policy, what are the pros and cons of using forecasted values of inflation and output rather than observed values of these variables?

  Describe the present economic crisis situation in europe

Describe the present economic crisis situation in Europe.  Why has it been so difficult for the Europeans to find a solution to this problem?   Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..

  Long-term federal government budget problems

Question:. Explain why there are long-term Federal government budget problems. Explain why the base-line forecast of the CBO is misleading.

  Derive and compare demand curve

Question based on Derive and compare demand curve,  Derive Ambrose's demand function for peanuts. How does it compare with Johnny's demand curve for peanuts?

  Problem based on utility function

Problem based on  Utility Function - Problem,  Answer and explain the following using a diagram which is completely labeled.

  Laffer curve : tax rate and tax revenue

Question based on Laffer Curve : Tax Rate and Tax Revenue,  Do raising tax rates necessarily raise tax revenue? What factors affect how tax revenue changes when tax rates change?

  Problem - income elasticity of demand

Problem - Income Elasticity of Demand,  Interpret the following Income Elasticities of Demand (YED) values for the following and state if the good is normal or inferior; YED= +0.5 and YED= -2.5

  Positive balance of payment

Question Positive Balance of Payment: "Things will look good for the US if we could just get to where we are consistently running a positive Balance of Payments."

  Effect of recession on the investment curve

Comment on the effect of a recession on the investment curve (only) and on the level of savings, investment, and the equilibrium real interest rate in the financial crisis that hits United States first starting in fall 2007.

  Affect of falling domestic investment on trade surplus and

How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.

  Crises in the banking sector and bank run

Banking crises crisis decreases depositors' confidence in the banking system. What would be the effect of a rumor about a banking crisis on checkable deposits in such a country?

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd