. Suppose you deposit $5,000 in a savings account that pays a nominal interest rateof 7% per year.a. If the inflation rate in recent years has been 3% annually, what is yourexpected real rate of interest?b. What happens to your real rate of interest if inflation turns out to be 1%?What is inflation turns out to be 5%. Which scenario do you prefer andwhy?2. In May of 1997 (the month your professor graduated from high school), the dollarprice of Canadian currency ($/F) was 0.72. In May of 2007 (your professors 10-year high school reunion), the dollar price of Canadian currency ($/F) was $0.92.a. Did the dollar appreciate or depreciate over this time? Why?b. What affect will this appreciation or depreciation have on Canadianpurchases of American-made goods? Why?c. What affect will this appreciation or depreciation have on Americanpurchases of Canadian-made goods? Why?3. In your own words, explain why aggregate demand is inversely related to thegeneral price level. Why do the explanations for the inverse relationship betweenthe general price level and aggregate quantity demanded for the aggregatedemand curve differ from the reasons a demand curve for a specific good slopesdown? It is important that you understand this question and not just copythe answer from the book and/or notes!!!Homework continues on other side of sheet.24. Explain how and why each of the following factors would influence currentaggregate demand in the United States. Illustrate each part by drawing the graphand providing a brief explanation behind the logic of the graph.a. Increased fear of recessionb. Increased inflation expectationsc. Rapid growth of real income in Canada and Western Europed. A reduction in the real interest ratee. The dollar appreciates against foreign currencies5. Construct the AD, SRAS, and LRAS curves for an economy experiencing:a. Full employmentb. An economic boomc. A recession6. Consider an economy at long run equilibrium corresponding to full employmentthat experiences an unexpected increase in the stock market.a. Starting your graph from long run equilibrium, show the effect of theincrease in stock prices. What are the short-run effects on output, theprice level, and unemployment?b. How does the economy adjust to restore long-run equilibrium? Explaincarefully.c. Using the graph from part a, illustrate the economy returning to long-runequilibrium. Looking at your graph, what are the permanent (long-run)effects of the increase in stock prices? Looking for the best essay writer? Click below to have a customized paper written as per your requirements.
Use the order calculator below and get started! Contact our live support team for any assistance or inquiry.
[order_calculator]