Question

24. Consider and economy described below:

    Cd=2800+.5(Y-T)-8000r; IP=2200-8000r; G=2200; T=3500
    If the potential output equals 8980 and the natural rate of unemployment is 3 percent. What interest rate should the central bank set to bring the economy to full employment?

    1. 1 percent

    2. 6 percent

    3. 9 percent

    4. 10 percent

24. Real GDP is $20 billion, nominal GDP is $25 billion, M1 is $6 billion and M3 is$8 billion. The velocity is

    a. 2.9 for both M1 and M3 b. 3.6 for both M1 and M3 c. 3.3 for M1 and 2.5 for M3 d. 4.2 for M1 and 3.1 for M3

25. If the cash rate falls in the overnight cash market, what is the impact on the demand and supply curves in the 180-day bank bill market? Recall that in these markets we plot the price of the bond on the vertical axis and the quantity of bonds on the horizontal axis.

    a. The supply and demand curves shift to the left
    b. The supply and demand curves shift to the right
    c. The supply curve shifts right and the demand curve shifts left
    d. The supply curve shifts to the left and the demand curve shifts right

26. Real GDP is $20 billion, nominal GDP is $25 billion, M1 is $6 billion and M3 is$8 billion. The velocity is

    a. 2.9 for both M1 and M3 b. 3.6 for both M1 and M3 c. 3.3 for M1 and 2.5 for M3 d. 4.2 for M1 and 3.1 for M3

27. If the cash rate falls in the overnight cash market, what is the impact on the demand and supply curves in the 180-day bank bill market? Recall that in these markets we plot the price of the bond on the vertical axis and the quantity of bonds on the horizontal axis.

    a. The supply and demand curves shift to the left
    b. The supply and demand curves shift to the right
    c. The supply curve shifts right and the demand curve shifts left
    d. The supply curve shifts to the left and the demand curve shifts right

28. Suppose that the inflation rate is 3.5% and the recessionary gap is 3%. However the Reserve Bank of Australia is holding the nominal overnight cash rate at 3.5 percent. If the Taylor rule is given by r= 0.01+0.5[(Y-Y*)/Y*]+0.5π, where “r” is the real interest rate, what is the nominal interest rate implied by the Taylor rule   a. 3.5 percent b. 4.25 percent c. 4.75 percent d. 5.25 percent

Answer 1

As you only need correct option of these questions. So, here the correct option of each and every question.

(1.) If the potential output equals 8980 and the natural rate of unemployment is 3 percent. The interest rate should the central bank set to bring the economy to full employment is:

• 9 percent

(2.) If the cash rate falls in the overnight cash market, The impact on the demand and supply curves in the 180-day bank bill market is:

• (b.) The supply and demand curves shift to the right

(3.) Suppose that the inflation rate is 3.5% and the recessionary gap is 3%. However the Reserve Bank of Australia is holding the nominal overnight cash rate at 3.5 percent. If the Taylor rule is given by r= 0.01+0.5[(Y-Y*)/Y*]+0.5π, where “r” is the real interest rate, the nominal interest rate implied by the Taylor rule:

• (b.) 4.25 percent

(4.) Real GDP is $20 billion, nominal GDP is $25 billion, M1 is $6 billion and M3 is$8 billion. The velocity is:

• (d.) 4.2 for M1 and 3.1 for M3