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- Question 1 Table 1: Economy X Demand for Money Quantity of Money Nominal Interest Rate (% per year) Holdings ($M) A 7 2.4 B 5 3.0 C 3 4.0 (i) What is the relationship between the two variables as shown in table 1 and why does this relationship exist? (ii) Assume the quantity of real money supplied (money supply) is $3M when interest rates are at 5%. Describe what is occurring when interest rates are at 7%?Pls help with below homework. Calculate the value of getting 1 000 000 EURO today and an alternative of getting 1 200 000 EURO in three years if you know that the possible nominal interest rate is 5% if: a) There is no taxation and no inflation. b) Inflation each year is 3% and no taxes. c) Inflation is 2% each year and a tax rate of 30% on interest flows applies. d) What is the difference between relative prices and MRS. e) What is the difference between cardinal and ordinal values of utility? Pls Show each step1.1. A decline in money purchasing power. Annual inflation was 7%. The percentage of money decreased purchasing power? Task 1.2. How will the purchasing power of money change during the year if there is a constant inflation rate of 1.5% in the quarter? 1.3. The bank pays a constant simple percentage of 10% a year. What amount should be invested in a bank account in order to accrue EUR 1000 after 4 years? 1.4. Holding period yield HPR holding period return. The deposit certificate was purchased 7 months before the maturity of 1000 euro and sold 2 months before the maturity date of the deletion of EUR 1200. What is the profitability of this financial operation for annual fruit in the form of a rate? Objective 1.5. How much money needs to be invested today in a bank that pays 12% a year and capitalizes fruit every quarter to get £1,000 after 6 years? 1.6. The bank is offering 18% a year, inflation is 15% a year. What is the real fruit rate? 1.7. EUR 1500 is invested in the bank account.…
- Assume that the demand for real money balances is given by the equation M/P = 0.6Y -100i, where Y output and i is the nominal interest rate (in percent). (a) If Y is 1,000, M is 100, and i is 4 percent, what must P be? (b) If i is 4 percent and the expected price level percent change (inflation) is 1 percent, what is the real interest rate? (c) Using the information above, graph the monetary market equilibrium and graph the LM relation. (d) Assume that Treasury Bonds pay an interest rate of 3 percent. A risk-neutral investor has the option of purchasing this bond or purchasing a bond from a company that has a 1 percent possibility of going bankrupt and defaulting. What should the risk premium for the company bond be?T chart of Canny bank Assets Liabilities Reserve: $10,000 Demand Deposit: $200,000 Government bonds: $300,000 Owners equity: $110,000 Laceland buys $50,000 of government from canny bank. (Money multiplier = 20) Maximum change caused by this is $1,000,000 change. (a)Based on this change above, Try to calculate the change in nominal gross domestic product based on the change above. (Use mv=py) (b) Assume the economy os Econland is initially at full employment, Does change ($1,000,000) increase, decrease, stay the same the real output in the long run? Explain.13. What effect does inflation have on the purchasing power of a dollar? Inflation reduces the purchasing power of the dollar. Facing higher prices with a given number of dollars means that each dollar buys (more, less ) than it did before. If the CPI was 110 last year and is 121 this year, what is this year's rate of inflation? This year's rate of inflation is (_ ) % because [ ( _-_)/. ]×100. How long would it take for the price level to double if inflation persisted at 7 percent per year? years. (Use the "rule of 70" )
- 6. Interest, inflation , and purchasing power Suppose Caroline is a sports fan and buys only baseball caps. Caroline deposits 2000 in a bank account that pays an annual nominal interest rate of 15%. Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit {comma} a baseball cap is priced at $20. Initially, the purchasing power of Caroline's 2000 deposit is baseball caps. For each of the annual inflationrates given in the following table, first determine the new price of a baseball cap, assuming it rises at the rate of inflation.then enter the corresponding purchasing of Caroline's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint:Brown your answers in the first row down to the nearest baseball cap. For example, if you find that the deposit will cover 20.7 baseball caps, you would round to the purchasing power down…6. Assume that the inflation rate will be 4% for all future years, and the interest rate is 7%. How many years will it take for the dollar to have the purchasing power that is equal to 65% of itscurrent purchasing power? (select the closest answer)a) about 7 yearsb) about 11 yearsc)about 18 yearsd) about 20 years6. You have decided that in order to have a comfortable retirement you will need to replace $65,000 in income each year in retirement. Assuming you will need 20 years of retirement income and an inflation rate of 3.5%, how much will you need to have saved up in order to meet your goal on the day you retire?
- The fresh deposits at the bank is $25000 and the LRR is 20% Calculate the total money created in the EconomyThe table below lists the prices from last year and the base year for a college-related basket of goods. Assume that the typical basket of goods for a college student consists of 190 gallons of gas, 65 pizzas, 50 6-packs, and 4 textbooks. Basket of College-Related Goods Basket of Goods Gasoline (per gallon) Pizza (per pizza) Beer (per 6-pack)> Textbook (per book) Price Base Year (dollars) $ 1.50 3.90 4.00 96.00 Price Last Year (dollars) $ 1.90 7.75 6.76 225.00 Instructions: Round your answers to two decimal places. a. Using the values above, what is the rate of inflation between the base year and last year? % b. Assume that rather than buying textbooks for their courses last year, all students decided to buy online access cards at $105 per textbook. What is the rate of inflation between the base year and last year now? %Only typed answer (a) A bank is offering 5-year certificates of deposit (CDs) with a 5% interest rate. The expected inflation rate is 3%. Calculate the expected real interest rate on the CD. (Show your work.