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  • Macro Assignment 1 (CT - 2)

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    Tanzina Islam
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    This document contains an economics assignment with two questions. The first question asks the student to calculate nominal GDP, price, and inflation rates given changes in the money supply and potential output for years 2018 and 2019. The second question asks the student to explain how an increase in the price level affects the real value of money and how an increase in the inflation rate affects nominal and real interest rates according to the Fisher effect.

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    This document contains an economics assignment with two questions. The first question asks the student to calculate nominal GDP, price, and inflation rates given changes in the money supply and potential output for years 2018 and 2019. The second question asks the student to explain how an increase in the price level affects the real value of money and how an increase in the inflation rate affects nominal and real interest rates according to the Fisher effect.

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    15 views1 page

    Macro Assignment 1 (CT - 2)

    Uploaded by

    Tanzina Islam
    This document contains an economics assignment with two questions. The first question asks the student to calculate nominal GDP, price, and inflation rates given changes in the money supply and potential output for years 2018 and 2019. The second question asks the student to explain how an increase in the price level affects the real value of money and how an increase in the inflation rate affects nominal and real interest rates according to the Fisher effect.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 1

    United International University

    ECN:2214;Macroeconomics
    Course Instructor: Tanzila Amir
    Assignment-1 (CT 2)

    Q 1.Solve the problem: (7)


    One good: wheat. The economy has enough labor, capital, and land to produce
    Y =1000 bushels of wheat .V is constant. In 2018, MS = $3000, P = $5/bushel
    .
    a. Compute nominal GDP and velocity in 2018.

    For 2019, the Fed decreases MS by 5%.

    a. Compute the 2019 values of nominal GDP and P. Compute the inflation rate for
    2018-2019.

    b. Suppose technological progress causes Y to increase by 5% in 2019. Compute


    2018-2019 inflation rate.

    Q 2.Short answer questions: (4*2=8)

    a. Explain how an increase in the price level affects the real value of money (provide
    graph with proper explanation)

    b. According to the Fisher effect, how does an increase in the inflation rate affect the
    real interest rate and the nominal interest rate?

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