The nominal interest rate is 2%. The rate of growth of money supply is 5%. The velocity growth is constant. What is the growth in nominal GDP?
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- Question 20 Revisit Later Q. "The National Statistical Office, which is under the Union Ministry of Statistics & Programme Implementation, has released its estimates for gross domestic product (GDP) in the first quarter (Q1) of this fiscal year, 2022-23. The headline is that GDP at constant prices in the first quarter showed 13.5 per cent growth year on year. This is a deceptively high level, given the base effect." The following options are given to explain why this number is deceptively high. i. Most expectations were for quarterly GDP growth in the 15-16 per cent range year on year. ii. Given the base effect, the growth rate of 13.5 percent is in fact a clear disappointment. iii. It needs to be remembered that the equivalent quarter of the previous year, April-June 2021, was when the devastating second wave of the coronavirus epidemic was raging through the country. iv. Even though there was no national lockdown as draconian as that observed during the first wave in 2020, activity…a. Examine the fundamental causes of a nation’s business cycle fluctuations. Also, examine the relationship between total spending by government and consumers in a nation and the location of the countries’ GDP on the business cycle. b. 1. Suppose you have $200,000 in a bank term account. You earn 5% interest per 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. The Australian Bureau of Statistics (ABS) reported in May 2017 that the civilian 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…Part 1) Can you Explain how an economy’s income must always equal its expenditure with simple example Part 2) Can you please write the problems with the Consumer Price Index. Part 3) What is fiat money? What is commodity money? Which kind do we use? Part 4) Suppose you given a choice to live in a country with high level GDP and low growth rate or to live in a low level of GDP and a high growth rate, which option would you choicee and why?
- 1. Consider an economy described by the following equations;Y = C + I + G +NXY = 5,000G = 1,000T = 1,000C = 250 + 0.75(Y–T)I = 1,000 – 50rNX = 500 – 500εr = r*=5%a) In this economy, solve for national saving, investment, trade balance and the equilibriumexchange rate.b) Suppose now that G rises to 1,200. Solve for national saving, investment, trade balance andthe equilibrium exchange rate and trade balance.1. Paul and Mary wanted to get married, and they wished to purchase a house for the new family. Therefore, they had arranged a meeting with a banker to know more about the mortgage details. They all expected that inflation will be 3 percent over the borrowing period, and the banker offered them a nominal interest rate of 6 percent. As it turns out, the inflation was 5 percent over the term of the loan. a. What was the expected real interest rate? b. What was the actual real interest rate? c. Who benefited and who lost because of the unexpected inflation?21. Assume that we are at the natural rate of GDP, meaning we do not have a recession or an expansion, and then the Central Bank raises interest rates, how can this create a recession (A) our business investments will increase and our exports will decrease (B) our business investments will decrease and our exports will increase C) our business investments will decrease and our exports will decrease (D) our business investments will increase and our imports will increase
- Course: Microeconomics - Intertemporal ConsumptionGiven the following data: ; where p1 = 10; m1 (income 1st period) = 100; m2 (income 2nd period) = 120; r (interest rate) = 0.2; and (inflation rate) = 0.2. So the quantities demanded of both goods are: a) C1 = 10 ; C2 = 10b) C1 = 15 ; C2 = 8c) C1 = 12.3 ; C2 = 7.4d) C1 = 8.7 ; C2 = 11.3 THANKS :DSuppose the government must increase taxes in order to increase spending. Now assume Congress wants to increase spending on education without decreasing spending somewhere else. For each variable state if it will INCREASE, DECREASE or REMAIN UNCHANGED. In at least one complete sentence state WHY this change will occur. Be specific. Private Saving (Sp): Consumption: (C) Government Saving (Sg) Total Saving: (S) Real Interest Rates: (r) Investment: (I)(27) What are the effects of capital destruction on other macro variables, including con- sumption (C), saving (S), investment (I), net exports (NX), loanable funds (L), real balance (m= M/P), real interest rate (r), nominal interest rate (R), real rental (rk), and nominal rental (R)? Please "circle" the effects on these variables on a table of the following form for the short run and the long run separately. macro variable consumption (C) saving (S) investment (I) net exports (NX) loanable funds (L) real balance (m= M/P) real interest rate (r) nominal interest rate (R) real rental (r) nominal rental (R₂) (a) (b) (c) (d) rise fall constant ambiguous ambiguous rise fall constant rise fall constant rise fall constant rise fall constant rise fall constant rise fall constant rise fall constant rise fall constant ambiguous rise fall constant ambiguous ambiguous ambiguous ambiguous ambiguous ambiguous ambiguous your answer
- Problems Exercise 1 Suppose a closed economy is represented by the following equations: Z= C+I+G C= co + C1x YD YD = Y-T T=100 I=0.2x Y-5000x i G=150 where Cis private consumption, I is investment, i is the interest rate set by the central bank; G is government spending, Y is income, Ypis disposable income and T represents taxes. Assume that co =250, i=2% (remember 2%=0.02), and c1 = 0.6. а. i. Given the above equations and variables, calculate the equilibrium level of output. ii. What is the multiplier for this economy? b. Now, assume that I is 0.1× Y-5000× i. Also, assume that co, C1, G, i and T remain unchanged: i. What is the new equilibrium level of output? How much does income change as a result of the change in ? What is the multiplier for this economy after the change in ? ii. ii. iv. What is the new level of consumption after the change in ? c. Assuming the same change as in (b), but letting G, i and T vary, which policies can the government do to achieve the same level of…6. An economy shows the following features : Consumption, C= 50 + 0.9 (Y – T) Tax Revenue, T= 100 Investment, I= 150 – 5i %3D Government expenditure, G= 100 Money demand, L = 0.2 y – 10i M Real money suPply =100 P Exports, X= 20 Imports, M= 10+ 0.1 Y where Y= income, i rate of interest figures in Rs. crores. %3D (a) Obtain the IS and IM equations of the economy (b) Find out equilibrium income and rate of interest atom (c) Find the balance of trade(b). Consider an economy described by the following equations Y =C+I+G Y = 5000; G = 1000; T = 1000; C = 250 + 0.75 (Y-T); I = 1000-50r (? --- cqu. ii) Now suppose that G rises to 1,250, compute: (1) National savings, (2) The new interest rate.