question archive Here is some data on the economy of a certain country
Subject:EconomicsPrice:3.87 Bought7
Here is some data on the economy of a certain country. Use this data for all three parts of question 1.
M1 Money Supply: $190 Billion
Real GDP: $765 Billion
Velocity of M1 Money Supply: 4.3
Question 1a: Right now, what is the rate of inflation in that country? How can you tell?
Question 1b: If they want to change the inflation rate to about 2% (which the Fed says is ideal), can they do so by changing the Money Supply? Assuming the velocity stays the same, about how much should the Money Supply be to get to the inflation rate to 2%
Question 1c: Give one example of action the Central Bank of that country could take to reduce the money supply. Explain how your example would work. For this question, assume that the Central Bank of that country has tools for Monetary Policy similar to the tools used by the F.O.M.C. in the USA. You don’t need specific numbers to answer this, just a clear explanation.
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