Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please answer this with explaination. 1. What happens to M1 and M2 clue to each of the following changes? You take $500 out of your

image text in transcribedimage text in transcribed

Please answer this with explaination.

image text in transcribedimage text in transcribed
1. What happens to M1 and M2 clue to each of the following changes? You take $500 out of your checking account and put it into a passbook sayings account. a. b. You take $1000 out of your checking account and buy traveler's checks. c You take $1500 out of your moneymaket mutual fund and deposit into your checking account. cl You cash in $2000 in sayings bonds and inyest the money in a certificate of deposit. 2. Money demand in an economy in which no interest is paid on money is Ma P = 500+ 0.2Y - 1000i a) Suppose that P= 100, Y= 1000 and / = 0.10. Find real money demand, nominal money demand and velocity. b) The price level doubles from P = 100 to P = 200. Find real money demand, nominal money demand and velocity. 3. Suppose the money demand function is Ma P -= 1000 + 0.2Y - 1000(r + m) Calculate velocity if Y = 2000, / = 0.06, and 7 = 0.04 Q50 If the money supply (MF) is 2600, what is the price level? Now suppose the real interest rate rises to 0.11, but Y and / are unchanged. What happens to velocity and the price level? So if the nominal interest rate were to rise from 0.10 to 0.15 over the course of a year, with Yremaining at 2000, what would the inflation rate be

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

E-Commerce 2013 Business Technology Society

Authors: Ken Laudon, Kenneth C Laudon

9th Edition

0132730359, 978-0132730358

More Books

Students also viewed these Economics questions