Under a credible system of fixed nominal exchange rates... A.The Central Bank can adjust the interest rate as it deems appropriate for smoothing domestic output fluctuations B.Domestic inflation will be approximately equal to the inflation rate of the country to which the domestic currency is pegged C.Public debt can be monetised, i.e. via government bonds bought by the Central Bank against newly created money D.All of these options E.None of these options

Under a credible system of fixed nominal exchange rates... A.The Central Bank can adjust the interest rate as it deems appropriate for smoothing domestic output fluctuations B.Domestic inflation will be approximately equal to the inflation rate of the country to which the domestic currency is pegged C.Public debt can be monetised, i.e. via government bonds bought by the Central Bank against newly created money D.All of these options E.None of these options

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 23CTQ: Given the federal budget deficit in recent years, some economists have argued mat by adjusting...

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There is currently a political and academic controversy whether or not stimulus packagesagainst the Covid-induced economic recession will cause inflation. Professor OlivierBlanchard has warned that the stimulus package of the US-administration may lead toinflation in the US. However, he does not see inflation dangers emanating from stimulusprograms in the Eurozone. The Next Generation EU program is not only considered to be a stimulus program but also tobe a growth program, which by spending on infrastructure and climate-related investmentsis expected to lead to an increase in potential output.Analyze in an AD-AS model the impact of economic growth on actual GDP and the pricelevel. Also elaborate on the role that an additional demand stimulus could play.
options:a contractionary fiscala contractionary monetarya recessionaryan expansionary fiscalan expansionary monetary an inflationaryequal to greater thangrew inflationless thanrecededthe same asunemployment
Economics How are aggregate output and the real interest rate determined in compettive egulbum? OA The aggregate oulput can be found by multiplying current employment by current real wage at the intesection of the current labour supply and demand curves, given the raal inderest rate. and ssubtracting the level of investment in the economy OB. Cument aggregata output and the real interest rate are determined by the intersection of the output supoly and demand ouves OC. Cunent aggregate output can be found by finding current employment from the intersection of the current labour supply and domand ourves given the real interest rate and aocounting tor total tactor productivity OD. The real interest rate is determined by the slope of the output supply curve at a given level of aggregate output
The economy begins in longcrun equilibrium. Thenone day, the president appoints a new chair of theFederal Reserve. 11\is new chainnan is well known forher view that inflation is not a major problcn1 for aneconomy.a. How would this news affect the price level thatpeople would expect to prevail?b. How would this change in the expected pricelevel affect the nonlinal wage that workers andfmn.s agree to in their new labor contracts?c. How would this change in the nonlinal wageaffect the profitability of producing goods andservia,s at any given price level?d. How docs this change in profitability affect theshort-run aggregate-supply curve?e. ff aggregate demand is held constant, how docsthis sllift in the aggregate-supply curve affect theprice level and the quantity of output produced?f. Do you think this Fed chainnan was a goodappointment?
1Why low rate inflation is considered necessary for economic grwoth? Oa It does not affect the purchasing power of wages Ob. It indicates that the currency is in continuous demand by the people Oc taffects only the rich and not the poor Od itact as an incentive to boost in supply in the economy 2When the economy is in Keynesian macroeconomic equilibrium, planned investment is greater than actual investment. O a False O b. True 3Government fixes the floor and ceiling price which will not allow the producers to increase the price on their wish, this is a type of. O a Physical control called price pegging O b. Monetary policy control measures O. Physical control called price tagging Od. Fiscal policy control measures O e None 4Rising output coupled with falling prices is called stagflation O a. False O b. True 5The Value of marginal propensity to consume lies O a. O to 1 O b. Less than zero Oc -1 to 1 Od. Between O to 1 6The Central Bank way to control inflation is Oa Monetary policy…
What is the difference between the price level and the tale of inflation?
Congratulationst You have been appointed an economic policy adviser to the United States, You are told that the economy is significantly abowe futtemplyoment GDP. Based on this inlormation, how can the economy would adjust to reach LR.SR Equilbrium (Classical View)? The economy wilt experience low unemployment rate, pushing wages up, and increasing the pelces of a key input (labor). shatting the sAS to the left (up). The economy will experience high unemployment rate, pushing wages down, and reducing the prices of a key input (labor). shiting the SAS to the right (down). The econoriny wil experience low unemployment rate, decreasing inceme, which will eventually shift the AD to the left. The eooncmy will experience low unemployment rate, pushing wages up, and increasing the prices of a key input (labor), shiting the sAs to the night (down).
In a closed economy, if the government wants to increase aggregate demand, it can O increase, increase O increase, decrease O decrease, increase O decrease, decrease government purchases or taxe The nation of Ectenia has long banned the export of its puka shells. A newly elected resident removes the export ban. This change in policy will cause the nation's currency to making the goods Ectenia exports expensive. O appreciate, less O appreciate, more O depreciate, less O depreciate, more
Which of these is an export for the UK economy? Selectați răspunsul corect: O a. Chinese tourists buying a cake in an English tea shop O b. UK car manufacturer buying Chinese steel O. An English lourist buying a colfee in Paris O d. An English football club buying a French footballer Strong inflationary expectations tend to discourage: Selectați răspunsul corect: O a. and harm collectors of gold coins. O b. saving and reduce inflationary pressure. curIsumplion and encouraye investmenl O d. saving and enhance infiationary pressure. O e. borrowing and encourage saving.
Questron 3 Suppose the nominal interest rate is currently 24 per cent and expected inflation is 16 per cent. IF the expected inflastion rate doubles to 3.2 per cent, wtich of the foloving would be an implication of the Fisher effect? O The real interest ate talls by 1.6 per cent O The nominal interant rate doubies to 48 per cent O The nominal interast rate rises n 5.6 per cent O The nominal incerest rate des co 4.0 por cent
Suppose market partidpants expect the krona to appredlate relattve to the dollar. In the following graph, shft the supply curve, the demand curve, or both to illustrate the effects of the expectations described. D D QUANTITY (krona) True or False: The expectation that the krona would appreciate actually caused the krona to depreciate. O True O False PRICE (dollars per krona)
Imagine that the U.S. economy finds itself in the followingsituation:agovernmentbudgetdeficitof$100 billion, total domestic savings of $1,500 billion, and total domestic physical capital investment of $1,600 billion.Accordingtothenationalsavingandinvestment identity,whatwillbethecurrentaccountbalance?What willbethecurrentaccountbalanceifinvestmentrisesby $50billion,whilethebudgetdeficitandnationalsavings remain the same?