Q-1. You are the new Governor of State Bank of Pakistan after Reza Baqir. For each of
Question:
Q-1. You are the new Governor of State Bank of Pakistan after Reza Baqir. For each of the situations listed below, decide if you would use Easy-Monetary policy or Tight-Monetary policy.
a) RGDP dropped from 3 percent to 1 percent in the last year.
b) The CPI and GDP deflator have risen 3 percent in the last six months.
c) Commercial interest rates are rising, but the SBP has not raised rates.
d) RGDP is growing steadily, and prices are rising sharply.
e) The Pakistan is experiencing both high inflation and high unemployment.
f) We are in a recession. Factory orders are down, and the economy appears to be slumping.
g) Unemployment is low and prices are rising steadily.
h) Unemployment rates are pushing 11 percent while the CPI has fallen from 8 percent to 2 percent growth.
i) We are in a recession but are experiencing high inflation.
j) The money supply appears to be tight, and prices are on the rise.
Q-2. You are given the following information.
Savings S = 150
Investment I = 100
Taxes T = 250
Government Purchases G = 500
a) Calculate the level of private savings, public savings, and national savings.
b) The labor force in Pakistan is 15,000,000 and the number of employed is 12,000,000. Calculate the number of unemployed and the unemployment rate. Also discuss it in few lines by comparing it with NRU (natural rate of unemployment 5%).
Q-3. (a). I deposited Rs. 3 million of my money in a Habib Bank Limited, State Bank of Pakistan: Required rate of reserve ratio (RRR): Weekly Average Demand Liability was set as 10.0 % in June 2020. You are required to calculate the change in the money supply in the economy. If RRR decreased to 5% in August 2020, what will happen with the same deposit of Rs. 3 million. You are also required to compare and discuss it in few lines.
b) Evaluate the policy options open to a government when the Government wants to close a deflationary gap (negative output gap) and reduce unemployment.
Q-4. (a) Using aggregate demand and supply diagrams, evaluate the extent to which the inflation taking place in China is of a cost-push nature.
b) Explain the main policies that the Chinese government has been adopting to try to reduce the level of inflation.
Expert Answer:
Answer The State Bank of Pakistan SBP held its main policy rate at 1325 per cent on Tuesday as it juggled competing goals of adding stimulus to the economy and taming inflation The central bank hashel... View the full answer
