Assume that at a Monetary Policy Committee meeting the South African Reserve Bank decides to increase the repo rate. what is the impact of a higher repo rate be on real production (Y) and prices
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- Assume that at a
Monetary Policy Committee meeting the South African Reserve Bank decides to increase the repo rate. - what is the impact of a higher repo rate be on real production (Y) and prices
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- If the statement is false or uncertain, please correct the statement to make it true. If the statement is true, please explain your answer briefly. In a closed economy, adjustment in the nominal interest rate causes the simultaneous equilibrium in the product market and in the financial market.The mandate of the South African Reserve Bank (SARB) states that “the Reserve Bank is required to achieve and maintain price stability in the interest of balanced and sustainable economic growth in South Africa”. There are several macroeconomic determinants that in many ways affect the outlook of the economy, such as inflation, growth, interest rates, unemployment and exchange rates. There has been an ongoing conversation among economists and politicians about the mandate of the SARB. Do you think that the mandate of the SARB should change? Support your view.The demand for money is given by Md = $Y (0.3 - i), where $Y = 100 and the supply of money is $20. What is the equilibrium interest rate? What is the impact on the interest rate if central bank money is increased to $25?
- Which of the following statements concerning the demand for money is false? The speculative demand for money varies directly with the level of national income. The transactions, precautionary, and speculative demands for money all vary inversely with the level of interest. The transactions demand for money is influenced by both the level of income and the interest rate.Consider a closed economy where the goods and money markets are described by the following relationships: C = 500+ 0.8(Y-T) I= 500 - 10r M/P = 0.1Y - 35r G = 800 T = 200 M = 1000 P = 2 Where C is planned consumption, I is planned investment spending, T' is government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate.Consider a closed economy where the goods and money markets are described by the following relationships: C 500+ 0.8 (Y-T) I= 500 10r M P a) 0.1Y35r G = 800 T = 200 M = 1000 P = 2 Where C is planned consumption, I is planned investment spending, T is government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. b) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). mpute also the level of consumption and investment spending in equilibrium and check whether the actual level of spending matches the equilibrium level of output. e) Suppose that, instead of relying on monetary policy, the government intends to take an active role in restoring the economy to the original equilibrium by pursuing an expansionary fiscal policy. How much should government spending change by? With the help of graphs, explain very carefully, the impact of this policy on the economy. f) An…
- Suppose in the economy of Apple Republic, the demand for money is given by Md = $Y (0.3 - i), where $Y = 100 and the supply of money (Ms) is $20. a. What is the equilibrium interest rate (i)? Answer: i = [ Select ] v %. b. If the central bank increases money supply (Ms) to $25, what is the impact on the interest rate? Answer: Interest rate (i) will [ Select ] to [ Select ] %.Consider a closed economy where the goods and money markets are described by the following relationships: C = 500+ 0.8 (Y-T) I = 500 - 10r M P = 0.1Y35r G = 800 T = 200 M = 1000 P = 2 Where C is planned consumption, I is planned investment spending, T is government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. a) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships. b) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). Compute also the level of consumption and investment spending in equilibrium and check whe her the actual level of spending matches the equilibrium level of output. c) Due to some negative news concerning the impact of global warming on the economy, consumers are becoming more pessimistic about the future to the point of reducing autonomous consumption by 50. 2. 1. What is…Consider a closed economy where the goods and money markets are described by the following relationships: C = 500+ 0.8(Y - T) I= 500-10r M b) P = 0.1Y - 35r G = 800 T = 200 1. 2. M Where C is planned consumption, / is planned investment spending, T is government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. = 1000 P = 2 a) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships. Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). Compute also the level of consumption and investment spending in equilibrium and check whether the actual level of spending matches the equilibrium level of output. c) Due to some negative news concerning the impact of global warming on the economy, consumers are becoming more pessimistic about the future to the point of reducing autonomous consumption by 50. What is…
- Suppose an economist believes that the price level in the economy is directly related to the money supply, or the amount of money circulating in the economy. The economist proposes the following relationship: P=A×MP=A×M • P=Price LevelP=Price Level • M=Money SupplyM=Money Supply • A=A composite of other factors, including real GDP, that change very slowly over time.A=A composite of other factors, including real GDP, that change very slowly over time. How might an economist gather empirical data to test the proposed relationship between money and the price level?Consider a closed economy where the goods and money markets are described by the following relationships: C = 500+ 0.8(Y-T) I= 500-10r - M P = = 0.1Y - 35r G = 800 T = 200 M = 1000 P = 2 Where C is planned consumption, / is planned investment spending, T is government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. b) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). Compute also the level of consumption and investment spending in equilibrium and check whether the actual level of spending matches the equilibrium level of output. d) If the Central Bank intends to pursue monetary policy in order to restore output to the same level before the fall in consumer confidence, how much should money supply change by? Use graphs to show the change in the economy and explain very carefully the monetary transmission mechanism e) Suppose that, instead of relying on monetary…Which of the following is an appropriate monetary policy to combat a negative GDP gap? a. raise income tax rates b. increase government spending c. lower real interest rates d. raise real interest rates