ReviewProblems(Test1lastsemester) - your work in the space...

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SHORT ANSWER.   Calculate the Expected Dollar Depreciation Rate against the  euro and the expected dollar return on euro deposits  if the  expected exchange rate is $1.10 per euro.   Your final answers should  be in the table below.  Show all work in  the space provided under  the table  ().
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Suppose the money demand function is given by Md/ =  640  +  0.1 -  5000 ( +    e). π Suppose the central bank changes the nominal money supply depending on income and inflation: MS  =  1000  +  0.1Y  - 4000 . π (a) If expected inflation equals actual inflation  =  0.03, Y  =  1000, and r  =  0.02, calculate the price level. (b If expected inflation rises to 0.04 while the other variables remain as in part a, calculate the price level.   Please show all 
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Unformatted text preview: your work in the space provided below (). Use Savings and Investment diagram along with the IS-LM model to determine the effect of higher user cost (uc) of capital on the long-run general equilibrium values of the real wage, employment, output, real interest rate, consumption, and price level . Explain your answers graphically. Use arrows in and under your graphs to show these changes. Hint: user cost of capital is the real cost of using capital. User cost is often associated with the depreciation of capital, due to the fact that capital wears out. ___________________________________________________________________________________________________________ _...
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This note was uploaded on 05/07/2010 for the course ECON 437 taught by Professor Genebirz during the Spring '09 term at Binghamton University.

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ReviewProblems(Test1lastsemester) - your work in the space...

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