Macroeconomics Answers

Discuss about the quantity theory of money.

What is the difference between forward guidance and time consistency? Why are they important?

If the economy is able to self-correct a positive GDP gap, why might the Fed wish to intervene in the market?

Using the Taylor Rule, find the appropriate Federal Funds rate (FFR).

Assume that the Fed has  target inflation rate of 2% and a target GDP growth rate of 3%. What FFR should the Fed target if the current inflation is 1% and the growth rate is 2%?

Enter the number without the percent sign.

QUESTION 1

Which of the following statements are correct? Select all that apply.

1. QE2 and QE3 occurred during the expansion following the Great Recession.
2. Many individuals argued that QE would lead to higher inflation rates.
3. In 2017, the Federal Reserve's balance sheet had assets of more than $7 trillion.
4. The Federal Reserve engaged in a fourth round of QE in response to the recession caused by the pandemic.

QUESTION 1

Prior to 2008, the Federal Reserve did not pay interest on reserves held by banks at the Federal Reserve. Many analysts argued that the requirement to hold reserves placed a tax on banks. How would you measure the tax?

1. discount rate
2. Fed funds rate (FFR)
3. interest rate on excess reserves (IROER)
4. the difference between the fed funds rate (FFR) and the interest rate on reserves (IOR)

QUESTION 2

Which of the following is correct? Select all that apply.

1. The Board of Governors sets the interest rate on reserves.
2. The federal funds market involves very short-term lending between banks.
3. The current target for the fed funds rate is 0.0% to 0.25%.
4. The interest rate on reserves (IOR) is 0.1%.
5. The current discount rate at the Fed is 0.25%.
6. The federal funds market involves lending between federal reserve banks.

Given: C = 100 + 0.65Yd (where Yd = Y-T) I = 120-400i G = 200 T = 20 + 0.2Y Ms/P = 200 Md/P = 50+0.5Y-600i Where: C = Consumption Y = Income I = Investment G = Government spending T = Taxes i = interest rate Ms/P = RealMoney Supply Md/P = Real Demand for Money (a) Derive the IS and LM curves (10 Marks) (b) Obtain the equilibrium level of: i. Income (4 marks) ii. and consumption

Is it possible for a project’s irr to be less than mirr?

A monopolist’s demand function is given as Q,=2000-10P where Q is the quantity is produced and sold and P is the price per unit in Ksh. If the firm’s marginal cost is K.sh100:

1. Calculate the monopolist’s equilibrium quantity and price.   

Which one of the following is most likely to increase the national debt?

A Foreign companies increasing their direct investment into the economy

B The central bank using its reserves of foreign currency to fund a trade deficit

C The government reducing its budget surplus by increasing its expenditure on infrastructure

D The government running a budget deficit, financed by selling bonds to foreign investors