If the slope of the nominal yield curve is steeper that the slope of the real yield curve, market predicts that boom is coming and inflation rate will go down in the future. recession is coming and inflation rate will go down in the future. boom is coming and inflation rate will go up in the future. recession is coming and inflation rate will go up in the future.
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- 4the money supply in freedonia this year is $150 billion Nominal GDP is $750 billions and real GDP is $250 billion. assuming that velocity of money is stable real GDP grows by 2%this year and the money supply does not change. what are the velocity price level and inflation ratewhen the inflation rate is expected to increase, the real cost of borrowing ______ at any given interest rate; the supply of bonds _____ and the supply curve shifts to the _____. is either rise or decline increase or decrease left or rightThe president of the United States announces in a pressconference that he will fight the higher inflation ratewith a new anti-inflation program. Predict what willhappen to interest rates if the public believes him.
- A Wall Street Journal offered the following opinion of the bond market in September 2012, when inflation rate was about 2%: Ac€A?Someone buying long-term bonds yielding 1.5% or 2% and then seeing consumer price inflation of 4%, will be on the loosing end of the betAc€??. a. Explain verbally and illustrate graphically what will happen to the price of bonds if expected inflation increases to 4% from 2%. Be sure to include in your answer the demand the bond market. b. Explain why someone buying long-term bonds yielding 1.5% or 2% and then seeing consumer price inflation of 4%, will be on the loosing end of the bet. c. Suppose that you expect a greater increase in inflation than do others investors, but that you do not expect the increase to occur until 2015. Should you wait until 2015 to sell your bond? Briefly explain. d. The columnist also argued that long-term bonds would be a good investment if only Ac€A? when we get serious price deflationAc€?? Ac€?c *Explain verbally and illustrate…Inflation has increased to new highs in recent years. How does expectation of higher inflation in the coming years affect interest rates? O A. Demand for bonds declines while supply of bonds rises resulting in higher nominal interest rates in the market. O B. Higher expectation of inflation will lower demand for money causing interest rates to decline in the future O C. Demand for bonds rises ip the expectation of higher nominal interest rates leading to a rise in the interest rate. O D. Demand for bonds increases while supply of bonds declines leading to a higher nominal interest rate.a Imagine an economy has the following situation: Velocity of money (V) is constant, Nominal Money Supply (M) growth is 8%, Output (Y) growth is 4% and real interest rate (r) is 4%. Calculate the following: i. Nominal interest rate (i) ii. If State Bank of Pakistan (SBP) increases the money growth rate by 2 percent point per year, find Δi? iii. If the growth rate of Y decreases to 2% per annum, what will happen to the inflation rate (π)?
- Question 48 When the inflation rate is expected to decrease, the demand for bonds everything else held constant. while the supply curve shifts tb the falls: right rises, left O falls; left rises; right * Previous Nex EPIC14. If the expected inflation rate is 5% and negotiators agree that the real wages should rise by 7%, the two sideswill agree to an increase in the money wage ofA 2%B 5 %C 7 %D 12%Suppose a given country experienced low and stableinflation rates for quite some time, but then inflation picked up and over the past decade had beenrelatively high and quite unpredictable. Explain howthis new inflationary environment would affect thedemand for money according to portfolio theories ofmoney demand. What would happen if the governmentdecided to issue inflation-protected securities?
- Assume that the Fed is believed to cut discount rate in the near future. A speculative investor is likely to OA Sell; Buy the government bonds now then them in the near future. B. Buy; Sell Oc Buy; Buy D. Sell; SellSuppose that a borrower and a lender agree on thenominal interest rate to be paid on a loan. Theninflation turns out to be higher than they bothexpected.a. Is the real interest rate on this loan higher or lowerthan expected?b. Does the lender gain or lose from thisunexpectedly high inflation? Does the borrowergain or lose?c. Inflation during the 1970s was much higher thanmost people had expected when the decade began.How did this unexpectedly high inflation affecthomeowners who obtained fixed-rate mortgagesduring the 1960s? How did it affect the banks thatlent the money1. Supposeyouhave$200,000inabanktermaccount.Youearn5%interestper annum from this account.You anticipate that the inflation rate will be 4% during the year. However, the actual inflation rate for the year is 6%.Calculate the impact of inflation on the bank term deposit you have and examine the effects of inflation in your city of residence with attention to food and accommodation expenses.2. TheAustralianBureauofStatistics(ABS)reportedinMay2017thatthecivilian population in Australia over 15 years of age was 20.8 million.Of this population of 20.8 million Australians, 13.5 million were employed and 0.7 million were unemployed.Calculate Australia’s labor force and the number of people in the civilian population who were not in the labor force? Also, with examples examine the causes of structural unemployment in Australia.