a The file named Four Markets shows all your favorite macroe

a. The file named Four Markets shows all your favorite macroeconomic markets in one place: The labor market, loanable funds market, money market, and the goods market. All four markets are currently in equilibrium. At the present, market participants are expecting an inflation rate of ____ percent for the future. Moreover, the nominal wage rate equals ____ dollars.

b. The file named Four Markets shows all your favorite macroeconomic markets in one place: The labor market, loanable funds market, money market, and the goods market. All four markets are currently in equilibrium. The Fed increases the supply of money by 50% (Don\'t worry. This scenario does not happen in the real world!) In the short run, the nominal interest rate will equal ___ percent and the real interest rate ___ percent.

Page Money Market 1% 0% 10 20405070 100 Amount of Moucy ) Goods Market 80 40 30 10 20 0 0 50 60 70 Ral GDP(V 100

Solution

Ans

A 2%.shown by difference between real and nominal interest rate.

B 3(real)+2(inflation) =5%

C 1% decided by intersection of money demand and money supply when money supply is 80(=2(40)=80)

D 1-2=-1%