Suppose a country has a money demand function mpd ky, Ask an Expert

Economics

Suppose a country has a money demand function (M/P)^d = kY, where k is a constant parameter. The money supply grows by 12 per year, and real income grows by 4 percent per year.

a. What is the average inflation rate?

b. How would inflation be different if real income growth were higher? describe.

c. Suppose, instead of a constant money demand function, the velocity of money is this economy was growing steadily because of financial innovation. How would that affect the inflation rate? describe.

View complete question

Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M963709

Have any Question?Write your Review or question?

Related Questions in Microeconomics

Question becky and sarah are sisters who share a room their

Question: Becky and Sarah are sisters who share a room. Their room can easily get messy, and their parents are always telling them to clean it up. Here are the costs and benefits to both Becky and Sarah, of taking the ti ...

Question using two demand and supply diagrams one for the

Question: Using two demand and supply diagrams, one for the low-wage labor market and one for the high-wage labor market, explain how information technology can increase income inequality if it is a complement to high-in ...

Question as noted earlier in this chapter ibm fell on hard

Question: As noted earlier in this chapter, IBM fell on hard times during the 1980s and ultimately abandoned its no-layoffs policy in the 1990s, while also taking other cost-cutting initiatives. Its "Hundred Percent Club ...

Question the investment tax credit was designed to increase

Question: The investment tax credit was designed to increase the ratio of capital spending to GDP and hence boost productivity growth. The credit was introduced in 1962, and although it was temporarily suspended in 1966 ...

Question suppose that households change their preferences

Question: Suppose that households change their preferences so that they wish to consume more and save less in the current year. Since the households reduce savings, the interest rate in the economy increases. a. Show on ...

Question identify 4 governance risks and explain what risk

Question: Identify 4 governance risks and explain what risk management strategies you would use to manage it and who would be responsible for thatIdentify 4 governance risks and explain what risk management strategies yo ...

Industrialization has made america one of the greatest

Industrialization has made America one of the greatest superpowers in the world. But that economic growth and prosperity has come with a price. In the early days of the Industrial Revolution in America factories spewed m ...

Question what is profit management how is it different from

Question: What is profit management? How is it different from cost or loss management? How does Mises' system of dividing components of business help direct profits to efficient units? How does this relate to decision ri ...

Question in the early 1980s the us rate of inflation fell

Question: In the early 1980s, the US rate of inflation fell from 13% to 4%, government regulation decreased and deregulation increased, and the Reagan Administration passed significant tax incentives to boost saving and ...

Question say the new york stock exchange average fell by 2

Question: Say the New York Stock Exchange average fell by 2 percent yesterday, and commentators spoke of a rush to sell. Because there had to be a purchaser of every share sold, why didn't they talk about a rush to buy? ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Microeconomics Expert