Suppose the Money Demand Function Is Given by

question 110

Essay

Suppose the money demand function is given by
M^d/P = 640 + 0.1Y - 5000 (r + π^e).
Suppose the central bank changes the nominal money supply depending on income and inflation:
M^s = 1000 + 0.1Y - 4000π.
(a)If expected inflation equals actual inflation = 0.03,Y = 1000,and r = 0.02,calculate the price level.
(b)If inflation rises to 0.04 while the other variables remain as in part a,calculate the price level.
(c)If expected inflation rises to 0.04 while the other variables remain as in part a,calculate the price level.
(d)If the real interest rate rises to 0.03 while the other variables remain as in part a,calculate the price level.

Describe the reporting requirements and management’s decision-making process regarding the fair value option.

Understand the rationale and accounting implications of transactions involving swaps.

Identify the implications of bond issuance costs under IFRS and their effect on the effective interest rate.

Understand the distinction between controllable and uncontrollable costs within a department.

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