ECON320 Intermediate Macroeconomic Theory Homework

Question # 00641692
Course Code : ECON320
Subject: Economics
Due on: 11/17/2022
Posted On: 11/17/2022 05:02 AM
Tutorials: 1
Rating:
4.9/5
Question

San Diego State University Meeting with A Killer Documentary Discussion

ECON 320 - Intermediate Macroeconomic Theory Homework 2 1 The Money Multiplier Suppose that people hold no currency, the ratio of reserves to deposits is 0.1, and that the demand for money is given by the following: Md = Y (.8 − 4i) where Y is income and i is the interest rate. Initially, the monetary base is \$100 billion and nominal income is \$5 trillion.

1. What is the demand for central bank money?

2. Find the equilibrium interest rate by setting the demand for central bank money equal to the supply of central bank money.

3. What is the overall supply of money? Is it equal to the overall demand for money at the interest rate you found in part b?

4. What is the impact on the interest rate if central bank money is increased to \$300 billion?

5. If the overall money supply increases to \$3,000 billion, what will be the impact on i?

2 IS-LM Consider the following IS-LM model: C = 200 + .25YD I = 150 + .25Y − 1000i G = 250 T = 200 Md P = 2Y − 8000i M P = 1600 Where all variables (C, Y , M, etc.) are real. 1

1. Derive the IS relation (Hint: You’ll want to solve for Y ).

2. Derive the LM relation (Hint: You’ll want to solve for i).

3. Solve for equilibrium real output.

4. Solve for the equilibrium interest rate.

5. Sove for the equilibrium values of C and I, and verify the value you obtained for Y by adding up C, I, and G.

6. Now suppose that the money supply increases M/P = 1, 840. Solve for Y , i, C, and I, and describe in words the effects of an expansionary monetary policy.

7. Set M/P equal to its initial value of 1, 600. Now suppose that government spending incrteases to G = 400. Summarize the effects of an expansionary fiscal policy on Y , i, and C. 3 IS-LM and Central Bank Money Consider the following IS-LM model with a banking system: Consumption: C = 7 + 0.6YD Investment: I = 0.205Y − i Government expenditure: G = 10 Taxes: T = 10 Money demand: Md P = Y i Demand for reserves: R d = 0.375Dd Demand for deposits: Dd = (1 − 0.2)Md 2 Econ 320 - HW 2 Demand for currency

CUd = 0.2Md This says that consumers hold 20% (c = 0.2) of their money as currency and the required reserve ratio is 37.5% (θ = 0.375). Demand for central bank money (Hd ) is the total amount of currency being demanded plus the total demand for reserves. Suppose the price level is P = 1 and that the initial supply of central bank money is \$100.

1. Solve for the money multiplier. Explain your work.

2. Solve for equilibrium output and the equilibrium interest rate at the initial supply of central bank money (ie. \$100).

3. Suppose that the central bank sells \$80 worth of bonds using open market operations. Solve for the new equilibrium output.

4. Solve for the the new equilibrium interest rate after the open market operations and use an IS-LM graph to explain what happened.

Posted By :
Questions: 14841 Tutorials: 14840
Tutorials for this Question

ECON320 Intermediate Macroeconomic Theory Homework

Tutorial # 00640572
Posted On: 11/17/2022 05:03 AM
Feedback Score: Not rated yet!
Purchased By: 2
Posted By:
Questions:
14841
Tutorials:
14840
Tutorial Preview
The solution of ECON320 Intermediate Macroeconomic Theory Homework...
Attachments
ECON320_Intermediate_Macroeconomic_Theory_Homework.ZIP (18.96 KB)

Great! We have found the solution of this question!

Tags:
Related Questions
ECON320 Intermediate Macroeconomic Theory Homework
San Diego State University Meeting with A Killer Documentary Discussion ECON 320 - Intermediate Macroeconomic Theory Homework 2 1 The Money Multiplier Suppose that people hold no currency, the rati …
Recent Questions
How do people learn in later years and what type of educational
How do people learn in later years and what type of educational activities can be offered to aging individuals? In this assignment, you will write a brief article suitable for use in a fictional onlin …
Counselling Deaf Clients in Canada - Socio-cultural and demographic
Counselling Deaf Clients in Canada. A. Socio-cultural and demographic background - In this section, include descriptive information about the specific cultural group that you have researched, such …
Project One Planning Document First Draft
Project One Planning Document First Draft Overview You have identified an issue in the natural sciences and developed an  initial research question. In Modules Three and Four, you will prac …
Psychology - Describe the schema you might form about
Psychology Question Assignment #1: Schemas. Visit www.amazon.com and find a product that is of interest to you. Read two conflicting reviews for the product. 1) Describe the schema you might for …
PSYC450 Family Systems Theoretical Analysis
PSYC 450 Family Systems Theoretical Analysis Create a 12-15 narrated presentation about Theoretical Analysis in family systems. Each slide requires 1-2 minutes of voice narration. You have to add A …
HUS320 Final Project: Crisis Intervention Plan and Reflection
HUS 320: Final Project: Crisis Intervention Plan and Reflection Learning Objectives: Design Comprehensive Crisis Plans Task: Imagine a complex crisis scenario (for example, a community affected by …
Psychology - One of the more controversial issues
Psychology Central Texas College One of the more controversial issues in the study of psychology has been the mind-body problem. Consequently, scholars have argued for a very long time about how th …
Psychology - Ethical Appropiateness, Do you believe testing
Psychology: Ethical Appropiateness Respond to the following  1. Do you believe testing can be conducted in a fair and unbiased manner? Why or why not? 2. What are factors that need to be c …
Personality Theories in the Psychodynamic Tradition
Personality Theories in the Psychodynamic Tradition [ Before beginning work on this discussion, read the chapter in your textbook that coincides with your assigned theorist (below). In addition, re …
Psychology - Summarize the key assumptions and assertions
Psychology Question This assignment is intended to prompt you to examine the ways in which gender-based attitudes and beliefs affect support for specific social policies. You will continue to exami …