What are the predictions for the long run equilibrium of the Monetary Approach?
What will be an ideal response?
Money supplies: Given the equations,
= PUS/PE
PUS = MUSS/L(R$, YUS)
PE = MES/L( , YE)
one can show that an increase in the U.S. money supply MUSS causes a proportional increase in the U.S. price level PUS, which in turn causes a proportional increase in . Thus, an increase in U.S. money supply causes a proportional long-run depreciation of the dollar against the euro and vice versa.
Interest rates: A rise in the interest rate R$ lowers U.S. money demand L(R$, YUS) thereby causing a rise in the U.S. price level and a proportional depreciation of the dollar against the euro.
Output levels: A rise in U.S. output YUS raises real U.S. money demand leading to a fall in the long-run U.S. price level and an appreciation of the dollar against the euro.
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The unemployment rate equals 100 multiplied by the
A) number of people unemployed divided by the number of people employed. B) number of people unemployed divided by the population. C) number of people unemployed divided by the labor force. D) number of people unemployed divided by the working-age population. E) labor force divided by the number of people unemployed.
Campbell recently began running his brother's lumber mill. Last month he took in $10,000 in sales revenue and paid $6,800 in out-of-pocket costs. He made an economic profit last month if his implicit costs were:
a. $2000. b. $3200. c. $4800. d. $6600.