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- Which of the following expectations will NOT increase spending? a. Employment b. Laying off c. Maturity of Investment d. PromotionQ.Assume that a commercial real estate whose monthly rent is TRY6,000 is to be sold at TRY4,000,000. Inflation rate has been 10% and the nominal interest rate 16% on the average for the last 15 years. The economy has grown at a real rate of 4% over the same period, so have rental revenues. If an investor has adaptive expectations, should he/she buy the real estate or not? Explain why.If most people have rational expectations, how long will recession last ? Explain.
- According to the Keynesian framework, ____________ in _______________ may cause inflation, but not a recession. a. decrease; interest rates b. an increase; domestic spending c. a decrease; a major trading partner's economy d. a decrease; a mayor trading partner's export prices I believe the correct answer is the increase in domestic spending because it will cause inflation but will shift AD to the right. What do you think?The accompanying graph represents the market for loanable funds in the hypothetical country of Bunko. Assume the market is initially in equilibrium and inflation expectations are 2%. a. Adjust the graph to demonstrate the effects of inflation expectations increasing from 2% to 4%. b. What is the real interest rate after the change in inflation expectations? 5% 3% 2% 7% c. Which effect below characterizes the relationshin shoud Farars Interest rate (%) 10 9 8 7 6 5 4 3 2 1 0 0 2 Market for Loanable Funds Scroll 4 6 8 10 12 14 16 Quantity of loanable funds (billions of $) 18 20According to adaptive expectations, what happensto the inflation rate and the unemploymentrate in the following situations?a. Initially, the economy is operating at thenatural rate of 6 percent unemployment.The anticipated rate of inflation is6 percent, and the actual rate is also6 percent.b. In the next period, there is an unexpected risein the inflation rate to 10 percent.c. In the next period, there is an unexpected risein the inflation rate to 12 percent.
- List some arguments for and against the likelihood of convergence.Summarize the Keynesian and Neoclassical models.1. Paul and Mary wanted to get married, and they wished to purchase a house for the new family. Therefore, they had arranged a meeting with a banker to know more about the mortgage details. They all expected that inflation will be 3 percent over the borrowing period, and the banker offered them a nominal interest rate of 6 percent. As it turns out, the inflation was 5 percent over the term of the loan. a. What was the expected real interest rate? b. What was the actual real interest rate? c. Who benefited and who lost because of the unexpected inflation?
- Which theory states that people make decisions based on information they've gathered? A. Life-cycle theory B. Theory of rational expectations C. Keynesian theory D. Theory of adaptive expectationsIf inflationary expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant. Select one: True FalseMacroeconomics Chapter 14 F X + fc39fb3-1b48-47ee-aaeb-458e57eb661a/7g3gvr/4/tools/assessment/items/ad9e398e-9d64-4a5c- Coccurs X ted 28 out of 45 3 of 45 > 011011DRWO When a collateral shock occurs during a recession, the recession is: lessened as it leads to more loans and fewer firm failures. lessened as it triggers more unemployment and more time bunching. amplified as it triggers reduced unemployment and less time bunching. O amplified as it leads to fewer loans and more firm failures.