|4 of 15 (0 complete) standard \"money demand\" fundtion used by macroeconomists
ID: 3326531 • Letter: #
Question
|4 of 15 (0 complete) standard "money demand" fundtion used by macroeconomists has the fom mere m vs. the quantity of real, money, GDPishe value of real) gross domestic prodat,and Risthe value ofthe nominal interest rate meas nei perent per year Suppos de at 1.304 #2- ao what is the expected change in m if GDP rereases by 4%? The value of m is expected to What is the expected change in m ifthe interest rate increases from 2% to 8%? The value of m is expected to by approximabely Round your response to the neareat inleger Enter your answer in each of the answer boxes Type here to searclhExplanation / Answer
Q2)
Option-A
The expanded form will be ax1+b+ax2+b+ax3+b+ax4+b+.....
=a(x1+x2+x3+x4+....)+(b+b+b...n times)
=a*n*x +n*b
(Since, total of x1,x2,x3... is equal to average of that set x multiplied by number of observations, n)
Q1) Upon simplification, we have
[m/(GDP^1)] = e^(0+2*R)
1=3.04 and 2=-0.06
m= (GDP^1). e^(0+2*R)
when GDP=x,
m1=(x^3.04).A where A=e^(0+2*R)
If GDP increases by 4%
m2=(1.04x)^3.04 . A= 1.126(x^3.04).A
% Change in m=12.66%
When R=2%
m= (GDP^1). e^0 e^2*R= A.e^2*R
where A= (GDP^1). e^0
when R=2%, m=A.e^-0.06*2= A.e^-0.12=0.88A
when R=8%, m=A.e^-0.06*8=A.e^-0.48=0.61A
Change in m= Decrease by 30.68%
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.