Question
In: Economics
Consider the following economy with: Real Money demand 〖 (M/P)〗^d = – 12 R + 0.38...
Consider the following economy with: Real Money demand 〖 (M/P)〗^d = – 12 R + 0.38 Y Real Money supply (M^s/P)= 4510 Derive the LM curve Derive the LM curve when the money supply increases by 680. Derive the LM curve when money supply decreases by 12% Compare the LM curves from a, b and c by graphing them using any graphing tool (excel preferably). Comment on the differences. Find the value of money demanded when income Y = 15,000 and interest rate R = 5. Is this equilibrium? Why? Why not?
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
Real money demand: (M/p)d = 0.5Y – 7,500r and money supply: Ms = 280, and P...
Real money demand: (M/p)d = 0.5Y – 7,500r and money
supply: Ms = 280, and P =1.
Try to keep decimal fractions (like 0.0667) in the form of simple
fractions (2/30) until calculating your final values for Y, r, and
so forth.
f. Now suppose that government spending
increases by 500 to 700. Summarize the effects of the expansionary
fiscal policy in part f by stating what happened to Y, r, C, I and
the budget balance.
...
Suppose that the real money demand function is(M/P)^d=800-50r+20y, where r is the interest rate in percent,...
Suppose that the real money demand function
is(M/P)^d=800-50r+20y, where r is the interest rate in percent, y
is the real income. The money supply is 2,000 and the price level
is fixed at 5.
a. What is the equilibrium interest rate if real income is fixed
at 10?
b. What happens to the equilibrium interest rate if the supply
of money is reduced from 2,000 to 1500? How will real income change
to make the equilibrium interest remain constant?
c....
1. Assume that the demand for real money balance (M/P) is M/P = 0.6*Y – 100*i,...
1. Assume that the demand for real money balance (M/P) is M/P =
0.6*Y – 100*i, where Y is national income and i is the nominal
interest rate. The real interest rate r is fixed at 3 percent by
the investment and saving functions. The expected inflation rate
equals the rate of nominal money growth. [Write 1, not 0.01, for 1
percent in the calculation.]
a. If Y is 1,000, M is 100, and the growth rate of nominal money...
a. Let the demand for real balances, [M/P] d , equals kY, where k is a...
a. Let the demand for real balances, [M/P] d , equals kY, where
k is a constant of proportionality and Y is real income. Derive an
expression for the velocity of money.
b. Let the demand for real balances, [M/P] d , equals 4Y/800i,
where Y is real income and i is the nominal interest rate. Derive
an expression for the velocity of money.
c. Suppose the Fed announces that it is reducing the growth rate
of the money supply...
Money demand in an economy in which no interest is paid on money is Md/P =...
Money demand in an economy in which no interest is paid on money
is
Md/P = 4000 + 0.3Y − 900i.
a. You know that P = 125, Y = 1000, and i = 0.10. Find real
money demand, nominal money demand, and velocity.
b. The price level doubles from P = 125 to P = 250. Find real
money demand, nominal money demand, and velocity.
c. Starting from the values of the variables given in part (a)
and assuming...
Suppose that money supply and money demand determine the price level (P) in an economy. As...
Suppose that money supply and money demand determine the price
level (P) in an economy. As shown in the equation below, in
equilibrium, money demand equals to money supply.
where M is the quantity of money, P is the price level, r is the
real interest rate, Eπ is the expected inflation, and Y is the
national income.
Does the real money demand positively or negatively depend on
nominal interest rate, i = r + Eπ? Does the real money...
Suppose that money supply and money demand determine the price level (P) in an economy. As...
Suppose that money supply and money demand determine the price
level (P) in an economy. As shown in the equation below, in
equilibrium, money demand equals to money supply. M/P = L(r+Eπ,Y).
where M is the quantity of money, P is the price level, r is the
real interest rate, Eπ is the expected inflation, and Y is the
national income.
a. Does the real money demand positively or negatively depend on
nominal interest rate, i = r + Eπ?...
Suppose Consumption = .6 (Y-T); Investment = 500/r; Real Money Demand = (10Y)/ r; the money...
Suppose Consumption = .6 (Y-T); Investment = 500/r; Real Money
Demand = (10Y)/ r; the money supply is 1000 and the Price Level is
2. Let G=T=0.
a. Find the equation for the IS curve.
b.Find the equation for the LM curve.
c. What are the equilibrium values of Y and r?
d. Suppose the Fed increases the money supply to 2000. Find the
new equilibrium values of Y and r.
a. Consider d on R, the real line, to be d(x,y) = |x2 – y2|. Show...
a. Consider d on R, the real line, to be d(x,y) =
|x2 – y2|. Show that d is NOT a metric on R.
b.Consider d on R, the real line, to be d(x,y) =
|x3 – y3|. Show that d is a metric on R.
2. Let d on R be d(x,y) = |x-y|. The “usual”
distance. Show the interval (-2,7) is an open set.
Note: you must show that any point z
in the interval has...
Which of the following are subrings of the field R of real numbers: (d) D =...
Which of the following are subrings of the field R of real
numbers:
(d) D = {a + b (3√3) + c (3√9) | a, b, c ∈
Q}.
(e) E = {m + n(1 + √ 3)/2 | m, n ∈ Z}.
(f) F = {m + n(1 + √ 5)/2 | m, n ∈ Z}.
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