HW2_KEY - Economics 2006 Homework No 2 Due on February...

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Due on February 18 [1]In Freedonia there is a 10% increase in the nominal money supply. As a result, according to the classical model, which of the following will occur? 1. Equilibrium output will rise. 2. The equilibrium interest rate will fall. 3. Employment will rise. 4. Each of 1-3. 5. Neither of 1-3. [2]In the loans market the interest rate is above its equilibrium level. Given this fact which of the following is true? 1. There is a positive excess supply of loans. 2. There is a positive excess supply of output. That is, full employment output is larger than the demand for output. 3. Each of 1 and 2 is true. 4. Neither 1 nor 2 is true. [3]Assume that the output market is in equilibrium. Given the following information, what is the quantity of funds demanded (and supplied) in the loanable funds market? Consumption Spending $4.0 trillion Net Taxes $2.4 trillion Household Saving $4.2 trillion Investment Spending $3.0 trillion Government Purchases $3.6 trillion 1. $6.4 trillion 2. $4.6 trillion 3. $2.0 trillion 4. $6.6 trillion 5. $4.2 trillion [4]In 2004, Freedonia’s money supply increased by 2%, its velocity increased by 1%, and its output increased by 1%. What was Freedonia’s 2004 inflation rate? 1. 2%.
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HW2_KEY - Economics 2006 Homework No 2 Due on February...

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