1. Describe three ways in which the Federal Reserve can change the money supply. 2. If the Federal Reserve is going to adjust all of these tools during an economy that is growing too quickly, what changes would they make? 3. If the Federal Reserve is going to adjust all of these tools during an economic recession, what cha
1. Use the DD-AA model to examine the effects of a one-time rise in the foreign price level, P*. If the expected future exchange rate rises immediately in proportion to P* (in line with PPP), show that the exchange rate will also appreciate immediately in proportion to the rise in P*. If the economy is initially in internal an
To what extent does the quantity theory of money provide a realistic view of inflation?
Consider an economy where only three products x,y, and z are produced and sold for the prices indicated below: Product;(Base year price);(Current year price);(Current year production) X; $1; $2; 200 Y; $4; $5; 50 Z; $5; $6; 100 A. What are the values of nominal GDP and real GDP in the current year? B. Explain the dif
Between 1984 and 1985, the money supply in the United States increased to $641.0 billion from $570.3 billion, while that of Brazil increased to 106.1 billion cruzados from 24.4 billion. Over the same period, the U.S. consumer price index rose to 100 from a level of 96.6, while the corresponding index for Brazil rose to 100 from