Explain why we observed a fall in the velocity of M2 during the financial crisis of 2007-2009.
Answer to relevant QuestionsComment on the role given to money in the monetary policy strategy of the ECB. Plot the percentage change from a year ago of the velocity of money (FRED code: A14187USA163NNBR) between 1922 and 1939. Compare the typical scales of the velocity declines during the recessions of this “interwar” period ...Suppose the U.S. economy is in equilibrium at the long-run real interest rate that prevails when aggregate expenditures equal potential output. Draw a diagram of aggregate expenditures showing this initial equilibrium. Then ...Explain how each of the following affects the short-run aggregate supply curve. (LO2)a. Firms and workers reduce their expectations of future inflation.b. There is a rise in current inflation.c. There is a fall in oil prices.A recession may reflect declines in aggregate demand, aggregate supply, or both. Are swings in consumer sentiment characteristic of recessions? Plot a measure of sentiment (FRED code: UMCSENT) and discuss its evolution ...
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