Preview

Econ/341 Week 1

Satisfactory Essays
Open Document
Open Document
693 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Econ/341 Week 1
University of Bahrain
College of Business Administration
Department of Economics and Finance

Econ 341 - Monetary Economics
Problem Set 6 (Chapter 22)
AlShawa

1. According to the quantity theory of money, movements in the price level result
* a. solely from changes in the quantity of money. b. primarily from changes in the quantity of money. c. partially from changes in the quantity of money. d. from changes in factors other than the quantity of money.

2. Because Keynes assumed that the expected return on money was zero, he argued that a. people would never hold money. b. people would never hold money as a store of wealth.
* c. people would hold money as a store of wealth when the expected return on bonds was negative.
…show more content…
changes in interest rates will have little effect on the demand for money. c. changes in income will have big impact on the demand for money. d. changes in income will have little effect on the demand for money.

8. Suppose the real money demand function is L(i, Y) = 1,000 - 1,000i + 0.2Y. Given that P = 200, Y = 2,000 and i = 10%, velocity is equal to a. 0.65 b. 0.75 c. 1.33
* d. 1.54

9. Which of the following is most likely to lead to a 1% increase in the nominal demand for money? a. Increase in real income by 0.5%. b. Decline in real income by 0.5%.
* c. Increase in the price level by 1%. d. Decline in the price level by 1%.

10. Suppose the real money demand function is L(Y, i) = 2,400 - 10,000 (r + πe) + 0.2Y. Assume MS =4,000, P = 2, Y = 5,000 and πe = 3%. The real interest rate is a. 3%. b. 6%.
* c. 11%. d. 14%.

11. If the income elasticity of money demand is 0.75 and the interest elasticity of money demand is -0.25, by what percent does the real money demand rise if real income rises 10% and the nominal interest rate rises from 4% to 5%?
* a. 1.25% b. 5% c. 6.25% d. 7.50%

%∆L(Y, i) = E L, Y * %∆Y + E L, i * %∆i = (0.75) (10%) + (-0.25) (25%) = 7.5% - 6.25% =

You May Also Find These Documents Helpful

  • Good Essays

    14) Suppose that when your wealth increases from $100,000 to $200,000, your holdings of savings deposits increase from $10,000 to $12,000. Your wealth elasticity of demand for savings deposits then is…

    • 371 Words
    • 2 Pages
    Good Essays
  • Powerful Essays

    d. Assume that inflation in London is 1.250%, the same as in New York. Determine the real rate of interest in London and in New York.…

    • 484 Words
    • 2 Pages
    Powerful Essays
  • Good Essays

    ACC 497 Final Exam

    • 2281 Words
    • 11 Pages

    9) As the interest rate increases for any given period, the future value interest factor will…

    • 2281 Words
    • 11 Pages
    Good Essays
  • Good Essays

    Econ 214- Problem Set 2

    • 539 Words
    • 3 Pages

    3. How would the following influence the growth rates of the M1 and M2 money supply figures over time?…

    • 539 Words
    • 3 Pages
    Good Essays
  • Good Essays

    qnt/351 week 4

    • 737 Words
    • 2 Pages

    L-3 communications is a great company to be involved in. As challenges arise, the HR department goes to work with statistical decision making in order to make the best decision possible. This paper is a reflection of how steps in the decisions making process are being used by L-3, and can be used by any company to come up with the right conclusions to help solve problems. L-3 is a leader in their industry because of the steps the HR department takes to solve problems.…

    • 737 Words
    • 2 Pages
    Good Essays
  • Good Essays

    ECO/372 Week 5

    • 769 Words
    • 4 Pages

    The current state of the US macroeconomy is not as strong as it has been in the past. The cost of living is high, imports are high, and the overall economy is suffering. Businesses are suffering because it is cheaper to import goods than it is to produce them in the US. With this in effect, the GDP is suffering as well. Even with the tariffs and quotas that the government has put on these items coming into the country, it is still cheaper to purchase from overseas. The macroeconomy of the US is suffering as a whole.…

    • 769 Words
    • 4 Pages
    Good Essays
  • Satisfactory Essays

    RES 351 week 2

    • 736 Words
    • 2 Pages

    Business Research EthicsDavid ZapataRES 351July 17, 2014Dr. Emma MillerBusiness Research EthicsAn article of interest that I found on our university library is about, Joseph J. C. DiCarlo, a mayor of Boston, Massachusetts. Joseph J.C. DiCarlo was found guilty of embezzling $40,000 from a consulting firm in New York for suppressing a legislative report. This report unfavorably criticized the firm’s construction contracts. Joseph J.C. DiCarlo already had a tarnished reputation of a corrupt official, and unethical practices.…

    • 736 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Week 2

    • 420 Words
    • 2 Pages

    Calculate VL and rsL for the scenario whereby Yancey uses $8.0 Million Debt costing 8%.…

    • 420 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    4. Assume that all the factors affecting demand in this model remain the same, but that the price has changed. Further assume that the prices are 100, 200, 300, 400, 500, 600 cents.…

    • 517 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Bus 640 Ch7-Ap-1

    • 415 Words
    • 2 Pages

    E. What will happen, in percentage terms, to the number of cans of tennis balls demanded if average household income increase by 20 percent?…

    • 415 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Week 1 Qnt 351

    • 592 Words
    • 3 Pages

    References: This is a hanging indent. To keep the hanging indent format, simply delete this line of text using the backspace key, and replace the information with your reference entry.…

    • 592 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    Pol/310 Week 1

    • 627 Words
    • 3 Pages

    This work POL 310 Week 4 Discussion Questions 2 Biodiversity, Extinction, and Making Choices in Policy contains answers on the following tasks: "Some people argue that since extinctions have always taken place, they should be considered a natural process and that the current extinction rates are not a matter of concern. Others point out that the preservation of biodiversity is essential to the continuation of life on Earth and that human actions have greatly accelerated the extinction rate. Should the policy process take into consideration all competing positions…

    • 627 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Hcs/341 Week 1

    • 620 Words
    • 3 Pages

    Human Resource Management or HRM is a doing that is focused on employ, running and developing the public in an association. This function also deals with the problems concerning worker recompense, employ, performance evaluation, security, progress, wellness, communication, guidance and advance. The human resource union in the organization take part in a huge part in building planned and rational proceed to running the corporation’s most essential asset; its people. Nearly all corporations see the HRM function as a chief contributing aspect in line up precise tasks to the worker’s abilities. In doing so, the corporation will be capable to efficiently reach its targets at a least necessary capitals.…

    • 620 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    During the Christmas shopping season the demand for money increases significantly. If the Fed takes no actions to offset the increase in money demand, then nominal interest rates will ____.…

    • 603 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    VL = $42.6 million + [.08 x .35 x $8 million / (.115 - .065)] =…

    • 353 Words
    • 2 Pages
    Satisfactory Essays

Related Topics