Suppose the quantity theory holds at all points in time so that there is an immediate...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Suppose the quantity theory holds at all points in time so that there is an immediate and full response of the price level (and no response of either velocity or output) of a change in the total stock of money in the economy. Andy, Martha, and Chris make up the whole population in this economy; their holdings of money are $70, $50, and $80, respectively. Assume that the government's holdings of money are zero (the total stock of money is the amount of money held by both consumers and the government). Suppose now that, as a statement of protest against his former employer the Council of Economic Advisers (Andy used to be an economist there) and on live TV, Andy burns all his money. (a) Does Andy's money fire destroy real resources? Explain. (b) Does the money fire change the distribution of real wealth of the different people in this economy? Assume that the money was all the wealth of these consumers (i.e., they owned no other assets) and try to calculate how the money fire changed the real distribution of wealth. (c) If Andy's fire was observed by Chair Powell and, as a result, he instructed her New York Fed crew to issue $70 to fully sterilize Andy's money fire (i.e., so that the total money stock remained at $200), what would the implication have been in terms of wealth redistribution? You may assume that the new money issue is a purchase of a $70 government bond directly from the government. Suppose the quantity theory holds at all points in time so that there is an immediate and full response of the price level (and no response of either velocity or output) of a change in the total stock of money in the economy. Andy, Martha, and Chris make up the whole population in this economy; their holdings of money are $70, $50, and $80, respectively. Assume that the government's holdings of money are zero (the total stock of money is the amount of money held by both consumers and the government). Suppose now that, as a statement of protest against his former employer the Council of Economic Advisers (Andy used to be an economist there) and on live TV, Andy burns all his money. (a) Does Andy's money fire destroy real resources? Explain. (b) Does the money fire change the distribution of real wealth of the different people in this economy? Assume that the money was all the wealth of these consumers (i.e., they owned no other assets) and try to calculate how the money fire changed the real distribution of wealth. (c) If Andy's fire was observed by Chair Powell and, as a result, he instructed her New York Fed crew to issue $70 to fully sterilize Andy's money fire (i.e., so that the total money stock remained at $200), what would the implication have been in terms of wealth redistribution? You may assume that the new money issue is a purchase of a $70 government bond directly from the government.
Expert Answer:
Answer rating: 100% (QA)
Andys money fire and its effects on wealth distribution a Does Andys money fire destroy real resources NoAndys money fire doesnt destroy real resource... View the full answer
Related Book For
Posted Date:
Students also viewed these economics questions
-
In 1988, a United Nations report by the late Prof. Roger Hood from Oxford University stated, "'In many regions of the world there is little sign that [death penalty] abolition will occur soon." How...
-
Read the case study: COMMONWEALTH OF THE BAHAMAS IN THE SUPREME COURT Common Law and Equity Division 2019/CLE/gen/01037 BETWEEN NIQUEL PINDER 1 st Plaintiff SHARMAINE BARR 2 nd Plaintiff TIFFANY REID...
-
Is there more to marketing than building product and brand awareness than what people discuss? How do marketing managers and executives manage consistent messaging across cultures?
-
Cut a disk a few centimeters or so in diameter from a piece of cardboard; punch two holes a bit off-center, big enough to loop a piece of string as shown in the sketch. Twirl the disk as shown, so...
-
Describe the role of corporations in the problem of plastic pollution. Suggest actions that corporations or industry groups could take to address this scourge. Describe examples of such efforts and...
-
Why a system of pulleys is used for lifting load ?
-
The following is a list of eight control plans from this chapter: Control Plans A. Limit checks B. Tickler files C. Public key cryptography D. Compare input data with master data E. Batch sequence...
-
Briefly describe the forensic psychology career field Explain what drew you to this field (forensic psychology) Examine the impact of past, current, and developing technology in your field (forensic...
-
Whats the difference between a real resource and a virtual resource?
-
8. Which term of the arithmetic sequence 4, 1, -2, -5,... is -29? A. 9th term B. 10th term C. 1th term D. 12th term 2 2 9. What is the 6th term of the geometric sequence 2 10, ..? . 250 25' 5' C....
-
7) Which of the following is an example of data? A) words B) a newspaper C) newspaper report D) a bank statement
-
Verify that det AB = (det A) (det B) for the matrices in Exercises 37 and 38. (Do not use Theorem 6.) 37. A = [ 38. A = == [ 1 ], B = [3 -2]. B = [11]
-
Consider the thin (steel) 200 mm long tapered plate varying width from 40 mm to 5 mm along the length. Plate is fixed at the top. The plate has uniform thickness t = 1 mm, Young's modulus E = 200 x...
-
=During the year, Beta sold (issued) additional common stock for $5,000 and declared dividends of $1,000. Beta began the year with a credit balance in Retained Earnings of $20,000 and a beginning...
-
The family of three lives in the south suburbs of Chicago. Therefore, the costs associated with household expenses are consistent with the price of things in the south suburbs. Assume that the single...
-
Recall that an anagram is a rearrangement of the letters in a word. (In a previous homework you counted the anagrams of SAMMY) (a) Come up with a seven-letter name that has 5040 anagrams. (b) Come up...
-
An access route is being constructed across a field (Figure Q8). Apart from a relatively firm strip of ground alongside the field's longer side AB, the ground is generally marshy. The route can...
-
Download the following programs from the CRE Web site where appropriate: a. Example Table 11.2: Algorithm for Gas-Phase Reaction Wolfram and Python 1. What happens to X and X e profiles as you vary T...
-
A plant is removing a trace of Cl2 from a waste-gas stream by passing it over a solid granulm absorbent in a tubular packed bed (Figure P14-8B). At present, 63.2% removal is being acomplished, but it...
-
The second-order decomposition reaction A B + 2C is carried out in a tubular reactor packed with catalyst pellets 0.4 cm in diameter. The reaction is internal-diffusion-limited. Pure A enters the...
-
A company expects to receive which of the following benefits when it uses its budgeting process? a. The planning required to develop the budget helps managers foresee and avoid potential problems...
-
The following budgets are all financial budgets except for the a. combined cash budget. b. budgeted balance sheet. c. budgeted income statement. d. capital expenditures budget.
-
The income statement is part of which element of a companys comprehensive budget? a. The operating budgets b. The capital expenditures budget c. The financial budget d. The cash budget
Study smarter with the SolutionInn App