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Homework answers / question archive / 1 The Bank of Canada's stated monetary policy is to restrict capital flows and target 2% inflation Please answer True, False or Uncertain and provide an short explanation in words
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The Bank of Canada's stated monetary policy is to restrict capital flows and target 2% inflation Please answer True, False or Uncertain and provide an short explanation in words. Your mark will be based on evidence used from the course. I.e. definitions, concepts, models and empirical trends.
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The Classical Dichotomy states that in the short run, prices are sticky and nominal variables can influence real variables. Please answer True, False or Uncertain and provide an short explanation in words. Your mark will be based on evidence used from the course. I.e. definitions, concepts, models and empirical trends.
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1. Suppose you want have 300,000 TL saved by the time you reach age 40 and suppose that you are 25 years old today. If you can earn 4% on your funds, how much would you have to invest today to reach your goal? (15 Pts) 2.Suppose you deposit $20,000 in an account today that pays 4% interest, compounded annually. How long does it take before the balance in your account is $80.000? (15 Pts)
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True
EXplanation:- The bank of Canada's stated monetary policy aims to keep at 2 per cent inflation target.which is mid point of 1 -3 % .Its expressed increase in the total consumer price index
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CLASSICAL DICHOTOMY
The word 'Classical dichotomy" is tributed to classical economics. It is denoted the exisistance of two kinds of variables as 'Real Variables ' and 'Nominal Variables. Real variables arenot expressed in currency terms and it is just inflation-adjusted variables it includes the Output ,Emolyment, real GDP etc.
The nominal variables are expressed in currency terms includes prices, nominal gdp etc.
This concept is done by Patinkin(1965) in Macro Economics.The main concept underlying this was real variables are
independent of the nominal variables that is chenges in nominal variables are does not affect the real variables.
Money has only function as exchange of commodities. And nominal variables are only calculate or determined by the s monetary factors not by the real factors.
The exisistance of Classical Dichotomy is only in the longrun. In short run the Classical Dichotomy system do not
works becouse Money is not neutral in Short run so the dichotomy does not exist.
Neutrality of money is that changes in money stock have no effect in real variables and only affects the price level.
In longrun the money is not neutral so there is relation between prices. while in the short run there is a trade off between the money and output.
This system is criticised later by keynes and monitary economists through the argument of sticky prices.
by the evidence that if in the short run the prices are failed to adjust ,the increment in suply of money could rises his the aggregate demand and this leads to change the real variables.
In conclusion the term 'Classical Dichotomy ' is not exists in Short run.
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Answer 1 :
Interest rate = 4%
You want to keep invested your money for 15 years
Desirable amount after 15 years = 300,000
Desirable amount = Money Invested * (1 + Rate of Interest)^Investment Period
300,000 = Money Invested * (1 + 0.04)^15
Money Invested = 166,579.35
You have to invested 166,579.35 now to get 300,000 when to turn 40.
