# hw2f06 - (10 homework points a Write the relationship the...

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Print name_______________________ Sign name ________________________ Econ 520 F 06 Homework 2 9/27, 9/29, due 9/30 2.1 (10 homework points). On Monday 9/24/06 Gold was selling for \$586/troy oz., while silver was \$11.17/troy oz., for a ratio of about 52:1. If the US were now to adopt a bimetallic standard with a mint ratio of 40:1, while the world price ratio remained around 52:1, what outcome would be predicted by Gresham’s Law? Explain briefly. Use back of page if necessary. 2.2 (10 homework points). Smith earns \$80,000 in 2016. a) If, as currently predicted by the market spread between indexed and non-indexed Treasury bond yields, the CPI-U in 2016 turns out to be 259.4 (1982-4 = 100), what is her 2016 real income, in 1982-4 dollars ?: b) What is her 2016 real income, in 2006 dollars , given that the (Aug.) 2006 CPI-U is 203.9 (1982-4 = 100)? :

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Unformatted text preview: (10 homework points) a) Write the relationship the Quantity Theory of Money predicts between the nominal money stock M, the demand for real money balances m d , and the equilibrium price level P (base year = 1): b) If real money demand is \$1036.8 Billion (1982-84 dollars) in August 2006, and the nominal money stock in August 2006 was \$2114.0 billion (Aug. 2006 dollars), what price level does the Quantity Theory of Money predict for Aug. 2006? Give your answer to the nearest 0.1, with a base level of 1982-4 = 100 , and show your calculation : Return after class 9/28, at your Friday recitation, or to your TA’s mailbox outside Arps 410 by 4:00 PM Friday 9/29. Partial credit will be given for late homework. (80% for 1 class late, 50% if in by last class of quarter.) Cooperation on homeworks is permitted and even encouraged. However, you must complete and sign your own homework....
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## This note was uploaded on 07/17/2008 for the course ECON 520 taught by Professor Ogaki during the Fall '07 term at Ohio State.

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hw2f06 - (10 homework points a Write the relationship the...

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