Question 1: Deriving and Solving the IS
... Answer. The beneficial supply shock shifts the FE line up to Ȳ 0 . The new equilibrium point is at the intersection of the FE’ line and the IS curve. The economy is no longer in general equilibrium because there is no point on the graph where all three curves intersect. In the long-run, the price l ...
... Answer. The beneficial supply shock shifts the FE line up to Ȳ 0 . The new equilibrium point is at the intersection of the FE’ line and the IS curve. The economy is no longer in general equilibrium because there is no point on the graph where all three curves intersect. In the long-run, the price l ...
Document
... An increase in the price of oil reduces the productivity of much of the existing capital stock and, as a result, reduces g. This would shift the short run new-Keynesian aggregate supply curve to the left, increasing price inflation and reducing output growth for a given level of aggregate demand. ...
... An increase in the price of oil reduces the productivity of much of the existing capital stock and, as a result, reduces g. This would shift the short run new-Keynesian aggregate supply curve to the left, increasing price inflation and reducing output growth for a given level of aggregate demand. ...
Dr. Barry Haworth University of Louisville Department of Economics
... b. if government raises tax rates on alcohol will raise the price of beer, wine, etc. c. raising cigarette taxes will reduce cigarette consumption in the long run d. higher income tax rates can impact the amount of labor people are willing to supply 2. Which of the following is a characteristic of a ...
... b. if government raises tax rates on alcohol will raise the price of beer, wine, etc. c. raising cigarette taxes will reduce cigarette consumption in the long run d. higher income tax rates can impact the amount of labor people are willing to supply 2. Which of the following is a characteristic of a ...
The Budgetary Implications of Higher Federal Reserve Board
... member of the board of governors at the time) in order to keep interest rates low and allow the ...
... member of the board of governors at the time) in order to keep interest rates low and allow the ...
FRBSF E L CONOMIC ETTER
... over the next 10 years (“note” and “bill” are the customary names for U.S.Treasury securities of these maturities).Then the term premium on the 10-year U.S.Treasury note would be about 0.5%, or 50 basis points. Thus, a key component of the term premium is investor expectations about the future cours ...
... over the next 10 years (“note” and “bill” are the customary names for U.S.Treasury securities of these maturities).Then the term premium on the 10-year U.S.Treasury note would be about 0.5%, or 50 basis points. Thus, a key component of the term premium is investor expectations about the future cours ...
Scots Trial without Solutions
... Wage increases in the manufacturing and services sectors Trade negotiators are unable to complete a new trade agreement with another country Which of the following is a structural cause of Australia’s current account deficit? Falling demand for our exports from our trading partners An increase in do ...
... Wage increases in the manufacturing and services sectors Trade negotiators are unable to complete a new trade agreement with another country Which of the following is a structural cause of Australia’s current account deficit? Falling demand for our exports from our trading partners An increase in do ...
Monetary policy in the euro area`s neighbouring countries
... The Danish krone, explicitly pegged to the euro since the inception of the currency union, also suddenly found itself having to contend with upward pressure. This reflected concerns about the future of the euro, and market assumptions that Denmark could become a member of a Nordic euro should the eu ...
... The Danish krone, explicitly pegged to the euro since the inception of the currency union, also suddenly found itself having to contend with upward pressure. This reflected concerns about the future of the euro, and market assumptions that Denmark could become a member of a Nordic euro should the eu ...
Matching History and Theory
... The Cost of Reducing Inflation • The Volker disinflation – Paul Volker – chairman of the Fed, 1979 – Peak inflation: 10% • Sacrifice ratio = 5 (5% dec in GNP for 1% dec in inflation) – Reducing inflation – great cost ...
... The Cost of Reducing Inflation • The Volker disinflation – Paul Volker – chairman of the Fed, 1979 – Peak inflation: 10% • Sacrifice ratio = 5 (5% dec in GNP for 1% dec in inflation) – Reducing inflation – great cost ...
The American Economy Since 1990
... ascertain how much of the good economic performance was the result of good economic policy making and how much was the result of other factors. ...
... ascertain how much of the good economic performance was the result of good economic policy making and how much was the result of other factors. ...
Word Version of homework due March 16, 2006
... pounds of Knockwurst; each cost 5 Snickers each (the local currency). This year Knockwurst is costing 8 Snickers. What is the inflation rate? 3. (5%) If the government did not require banks to keep reserves, they would not do so. Explain whether you agree or disagree with this statement. 4. (5%) If ...
... pounds of Knockwurst; each cost 5 Snickers each (the local currency). This year Knockwurst is costing 8 Snickers. What is the inflation rate? 3. (5%) If the government did not require banks to keep reserves, they would not do so. Explain whether you agree or disagree with this statement. 4. (5%) If ...
Chapter 8
... Who is Unaffected by inflation? • Flexible-Income receivers: they can avoid inflation’s harm or even benefit from it. • They benefit more from unanticipated inflation. Debtors: they pay back less valuable money whose purchasing power has been eroded by inflation. • Real income is redistributed away ...
... Who is Unaffected by inflation? • Flexible-Income receivers: they can avoid inflation’s harm or even benefit from it. • They benefit more from unanticipated inflation. Debtors: they pay back less valuable money whose purchasing power has been eroded by inflation. • Real income is redistributed away ...
On the Nominal Interest Rate Yield Response to Net Government
... identify determinants of the nominal interest rate yield on ten-year U.S. Treasury notes, including the impact of the federal budget deficit on same. To do so, a loanable funds model is adopted in which the nominal intermediate-term (in this study, ten-year) interest rate yield is, assuming all othe ...
... identify determinants of the nominal interest rate yield on ten-year U.S. Treasury notes, including the impact of the federal budget deficit on same. To do so, a loanable funds model is adopted in which the nominal intermediate-term (in this study, ten-year) interest rate yield is, assuming all othe ...
28.1 money and the interest rate
... forgone on an alternative asset. Opportunity Cost: Nominal Interest is a Real Cost The opportunity cost of holding money is the nominal interest because it is the sum of the real interest rate on an alternative asset plus the expected inflation rate, which is the rate at which money loses buying pow ...
... forgone on an alternative asset. Opportunity Cost: Nominal Interest is a Real Cost The opportunity cost of holding money is the nominal interest because it is the sum of the real interest rate on an alternative asset plus the expected inflation rate, which is the rate at which money loses buying pow ...
The inflation - Mr. Haglin Economics
... (M) what will happen to prices (P)? Ex: Assume money supply is $5 and it is being used to buy 10 products with a price of $2 each. 1. How much is the velocity of money? 2. If the velocity and output stay the same, what will happen if the amount of money is increase to $10? Notice, doubling the money ...
... (M) what will happen to prices (P)? Ex: Assume money supply is $5 and it is being used to buy 10 products with a price of $2 each. 1. How much is the velocity of money? 2. If the velocity and output stay the same, what will happen if the amount of money is increase to $10? Notice, doubling the money ...
... currency’s conversion rate into euro is to equal its end-of-Stage Two market exchange rate against the European Currency Unit (ECU) basket of twelve EU currencies. This requirement has the relatively minor implication that the euro’s scale probably cannot be known until December 31, 1998 (Denmark, G ...
2. What is deflation?
... stability is crucial and can be considered a first line of defence against deflation risks. The anchoring of inflation expectations can be greatly facilitated by a quantitative specification of the objective of price stability. In choosing this quantitative objective, due consideration should be giv ...
... stability is crucial and can be considered a first line of defence against deflation risks. The anchoring of inflation expectations can be greatly facilitated by a quantitative specification of the objective of price stability. In choosing this quantitative objective, due consideration should be giv ...
Interest rate
An interest rate is the rate at which interest is paid by borrowers (debtors) for the use of money that they borrow from lenders (creditors). Specifically, the interest rate is a percentage of principal paid a certain number of times per period for all periods during the total term of the loan or credit. Interest rates are normally expressed as a percentage of the principal for a period of one year, sometimes they are expressed for different periods such as a month or a day. Different interest rates exist parallelly for the same or comparable time periods, depending on the default probability of the borrower, the residual term, the payback currency, and many more determinants of a loan or credit. For example, a company borrows capital from a bank to buy new assets for its business, and in return the lender receives rights on the new assets as collateral and interest at a predetermined interest rate for deferring the use of funds and instead lending it to the borrower.Interest-rate targets are a vital tool of monetary policy and are taken into account when dealing with variables like investment, inflation, and unemployment. The central banks of countries generally tend to reduce interest rates when they wish to increase investment and consumption in the country's economy. However, a low interest rate as a macro-economic policy can be risky and may lead to the creation of an economic bubble, in which large amounts of investments are poured into the real-estate market and stock market. In developed economies, interest-rate adjustments are thus made to keep inflation within a target range for the health of economic activities or cap the interest rate concurrently with economic growth to safeguard economic momentum.