User Account

All Pages

What is the inflation rate

Assignment Help Business Economics
Reference no: EM131866747

Suppose that velocity is constant, nominal GDP is growing by 3% per year, real GDP growth rate is 0%, and the nominal interest rate is 5%. Using the quantity theory of money, the fisher equation, and the classical dichotomy, answer the following questions about the long-run.

a) What is the inflation rate?

b) What is the real interest rate.

c) What is the money growth rate?

d) Suppose that the Central Bank (i.e. the Federal Reserve) would like inflation to be 2% in this economy. Based on the information we have, what would they need to set the money growth rate to in order for inflation to be the 2% target?

e) Assume the Central Bank has set the money growth rate in order to achieve its 2% inflation target as in part d). What is the nominal interest rate as a result of this?

f) Assume the Central Bank has set the money growth rate in order to achieve its 2% inflation target as in part d). What is the real interest rate as a result of this?

Reference no: EM131866747

Questions Cloud

Explain the patterns of international capital flows : Be able to explain the patterns of international capital flows during the periods 1991-96 and 2001-2006.
Why is it difficult to use project management software well : Explain the difference between estimating activity durations and estimating the effort required to perform an activity.
Discuss the options and determine the best choice : Discuss these two options and determine the best choice. Ensure that all teammates concur with the decision and understand the rationale.
Discuss the applicability of these solutions to it projects : Discuss the applicability of these solutions to IT projects and Discuss how the role of the project manager would change - Describe these solutions
What is the inflation rate : a) What is the inflation rate? b) What is the real interest rate. c) What is the money growth rate?
Establish the configuration for each device : Using the network diagram located below, incorporate into the diagram the devices on the lower right to create a secure corporate network.
Field of physics to the field of economics : Robert Solow reportedly remarked that when Paul Samuelson switched from the field of physics to the field of economics
What must the equilibrium nominal interest rate be : a) What must the equilibrium nominal interest rate be? b) What must the velocity of money be?
Natural rate of unemployment for economy : Suppose in an economy 3% of workers lose their jobs each month while about 37% of unemployed workers found a job. What is the natural rate

Reviews

Write a Review

Business Economics Questions & Answers

  Xplain how should manager of company acquire flour

To produce that many donuts weekly, company uses 1,000 pounds of flour, which must be delivered by 5:00 am every Friday morning. Explain how should manager of company acquire flour. Explain."

  Money market graph side-by-side

Below draw an AD/AS graph and a money market graph side-by-side. For the money market, use an upward sloping money supply curve and assume that the equilibrium interest rate in the money market is 5%. Is this rule based policy pro-cyclical or counter..

  Draw labor supply and demand curves for cashiers

Draw labor supply and demand curves for cashiers in Hadley supermarkets.

  Consider firms per-period production process

Consider a firms per-period (e.g., hourly) production process. If it employs 1 unit of labor, then 5 units of output will be produced; if it employs 2 units of labor, then 12 units of output will be produced; and if it employs 3 units of labor, then ..

  The malthusian population trap model

The Malthusian population trap model has been criticized on the grounds that it

  Consider the following lp problem

How many slack, surplus, and artificial variables would be necessary if the simplex method were used to solve this problem?

  Pick an existing or proposed environmental policy

Pick an existing or proposed environmental policy. Use market failure theory to explain or justify the policy. Then use public choice theory to provide a possible alternative explanation for the policy.

  Major effects that relative interest and inflation rates

Analyze the major effects that relative interest and inflation rates could have on a country’s currency. Suggest the crucial steps that a company could take in order to minimize the adverse effects of currency fluctuations. Evaluate the efficiency of..

  Purchase the oven with internal financing

Suppose instead that you expect your costs and your prices to increase by 3 percent. But the price of the oven is still $10,000. Do you change your decision about whether to purchase the oven with internal financing? Do you change your decision ab..

  National output after the multiplier process

If overall spending rises by $300 billion and the MPC is .75, what would be the change in national output after the multiplier process is complete?

  Illustrate what do you think disrupted mcdonald plans

if customers also purchased French fries and a soft drink, Wall Street Journal reported that company was hoping novel promotion would revive its US sales growth. illustrate what do you think disrupted McDonald's plans.

  Discuss the minipublics-types of institutional design

Discuss the minipublics (types of institutional design) presented by Archon Fung. Which one(s), in your view, provide the best avenues for deliberation and civic participation on the part of the citizens and the institutions of governance?

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