Question

In: Economics

According to the long run money market model, if money supply is growing at 4% in...

According to the long run money market model, if money supply is growing at 4% in the United States and 5% in the United Kingdom, while real GDP is rising at 2% in the United States, and at 1% in the United Kingdom, what will happen to the nominal exchange rate between USD and British pound? What is the rate of expected depreciation?

Solutions

Expert Solution



Related Solutions

According to the AD/AS model, the long-run aggregate supply curve is determined by the availability of...
According to the AD/AS model, the long-run aggregate supply curve is determined by the availability of labor, capital, natural resources and technology. Select one: True False A decrease in demand would cause the price level to fall and the SRAS to shift to the left. Select one: True False Suppose the economy is in long-run equilibrium. If there is an increase in government spending at the same time that an increase in resources reduces production costs, then in the short-run...
Analyze the short run and long run effects of an unanticipated decrease in the money supply...
Analyze the short run and long run effects of an unanticipated decrease in the money supply in the misperceptions model. Tell me what happens to output, the actual price level and expected price level in both the short run and long run.
a) “According to the long-run classical model, there will be a decrease in the world interest...
a) “According to the long-run classical model, there will be a decrease in the world interest rate and the world level of investment when the aging populations of industrial countries start running down their savings and, at the same time, the investment appetite of emerging economies begins to slow down.” True/False, explain with the aid of one diagram for the world market for loanable funds. (10 points) Note: The world as a whole is a closed economy. b) A new...
Suppose that the money supply increases in the short run, this will increase prices according to...
Suppose that the money supply increases in the short run, this will increase prices according to __________. Group of answer choices both the short run Phillips curve and the aggregate demand and aggregate supply model neither the short run Phillips curve not the aggregate demand and aggregate supply model the short run Phillips curve but not the aggregate demand and aggregate the aggregate demand and aggregate supply model but not the short Run Phillips curve
4. (goods market and money market) Consider the following short-run model of a close economy Y=150...
4. (goods market and money market) Consider the following short-run model of a close economy Y=150 C=40+0.5(Y - T) I=30-5r G=25, T=20 a. Find the real interest rate that produces equilibrium in the goods market (For example, if real interest rate is 4%, then r=4). Then use a saving-investment diagram to show how the equilibrium interest rate is predicted to change if President Trump builds "the wall" between Mexico and the U.S. (4%) b. Suppose that the inflation rate equals...
If the fed reduced the growth rate of the money supply to the long run growth...
If the fed reduced the growth rate of the money supply to the long run growth rate of output immediately and people believed that it would persist, what would the immediate impact be? Explain whether each variable rises, falls or not change and why. A. Expected inflation B. The nominal interest rate C. The real interest rate
The long-run response to an increase in the growth rate of the money supply is shown...
The long-run response to an increase in the growth rate of the money supply is shown by shifting a. the short-run and long-run Phillips curves left. b. the short-run and long-run Phillips curves right. c. only the short-run Phillips curve left. d. only the short-run Phillips curve right.
1.use graphs and words to explain the market day supply, short run supply and long run...
1.use graphs and words to explain the market day supply, short run supply and long run supply 2.which of the following best explains why the price of many goods are decreasing in the current economic slump, yet sales are decreasing too? a. demand curves have a positive slope during recessions. b. innovations have caused price and sales to decline. c. incomes have fallen. d. population has grown. e. people expect prices to begin rising soon.
Construct a model that shows how – in the longer run -- money supply and demand...
Construct a model that shows how – in the longer run -- money supply and demand as well as the dollar return on foreign assets determine the exchange rate. Be complete.
According to the liquidity preference model: A. an increase in the money supply lowers the equilibrium...
According to the liquidity preference model: A. an increase in the money supply lowers the equilibrium rate of interest. B. the demand for money curve is a vertical line. C. the money supply curve is a horizontal line. D. a decrease in the money supply lowers the equilibrium rate of interest. A price floor or a price ceiling is an example of: A. market equilibrium price. B. a quota. C. a price control. D. a quantity control.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT