All categories

3 years ago

How might an economist gather empirical data to test the proposed relationship between money and the price level?

2 answers:

6 0

The quantity theory of money says that:
M V = P Y
where M is money supply, V is income velocity of money, P is price level and Y is income level.
Using the analyze of the empirical data, we can say that there is a long-run association between money and price.

Vikentia [17]3 years ago

6 0

An economist gather empirical data to test the proposed relationship between money and the price level by gathering data on past changes in the money supply and note the resulting changes in the price level.

<h3>Further explanation </h3>

Economists cannot study complex relationships using data because they are unlike the researchers in the hard sciences that can run a controlled laboratory experiment for the generation of data to test the theories and relevant models. An economist would look for data on past changes in the money supply, and note the resulting changes in the price level

An economist can develop models and theories to provide a description of the world based on observed phenomena, because there is a close association between price and money.

Economists do not usually develop theoretical models of the economy but they only analyze the summary statistics about the current state of the economy. An economist would persuade the Federal Reserve to change the money supply to various levels, and also observe the resulting changes in the price level.

An economist supposed to believe that the price level in the economy is directly related to the money supply or the amount of money circulating in the economy. The following relationship is applied to that condition:

$P=A * M$ , where

P = Price Level

M = Money Supply

A = A composite of other factors including real GDP that change very slowly over time.

<h3 /><h3>Learn more</h3>

Learn more about relationship between money and the price level brainly.com/question/6696702

<h3>Answer details</h3>

Grade: 9

Subject: business

Chapter: relationship between money and the price level

Keywords: price level, money

You might be interested in

Using the interest method, the journal entry to record the first interest payment and the related amortization for bonds issued

slavikrds [6]

A. Debit; Premium on Bonds Payable

6 0

3 years ago

Schnusenberg Corporation just paid a dividend of D0 = $0.75 per share, and that dividend is expected to grow at a constant rate

olga_2 [115]

Answer:

Option E is correct

Price of share = $31.95

Explanation:

The price of the share is the future dividend discounted at the required rate of return .

The required rate of return is the cost of equity . The cost of equity is computed as follows:

Cost of equity = Rf + β(Rm-Rf)

Rf= 4.50, Rm= 10.50, β= 0,75

Ke= 4.50% + 0.75×(10.50-4.50)

Ke= 9%

Price of share = Do×(1+g)/(Ke-g)

Price of the share = 0.75 × (1.065)/(0.09-0.065)

= 31.95

Price of share = $31.95

7 0

3 years ago

Debt is generally the least expensive source of capital. This is primarily due to ________. debts fixed interest payments and fi

drek231 [11]

Answer: Debt being less risky than equity and interest payments being tax deductible.

Explanation: Debt securities are the securities having fixed interest rates and a fixed time period to maturity. The debt holders are not considered owners of the company but rather they are the the creditors.

Debt is considered the cheapest source of finance for a number of reasons the main of which is the interest payments on debt could be deducted as expense while computing taxable income .

6 0

4 years ago

The $1,000 face value ABC bond has a coupon rate of 10%, with interest paid annually, and matures in 3 years. If the bond is pri

dybincka [34]

Answer:

Bond Price = $951.9633746 rounded off to $951.96

Explanation:

To calculate the quote/price of the bond today, which is the present value of the bond, we will use the formula for the price of the bond. As the bond is an annual bond, we will use the annual coupon payment, annual number of periods and annual YTM. The formula to calculate the price of the bonds today is attached.

Coupon Payment (C) = 1000 * 10% = $100

Total periods remaining (n) = 3

r or YTM = 12%

Bond Price = 100 * [( 1 - (1+0.12)^-3) / 0.12] + 1000 / (1+0.12)^3

Bond Price = $951.9633746 rounded off to $951.96

7 0

3 years ago

You deposit $100 in an account that pays 6 percent annual interest, compounded quarterly. What will your deposit grow to in 3 ye

Burka [1]

Answer:

$119.56

Explanation:

We will use compound interest formula to solve this problem.

The formula is:

$F=P(1+r)^t$

Where

F is the future value

P is the present amount

r is the rate of interest per period

t is the number of periods

Here,

F is the value we want, after 3 years

P is the present amount, $100

r is the rate of interest per quarter (per period)

Given r = 6% annually, so that would make:

6%/4 = 1.5% per quarter, or 1.5/100 = 0.015

Also, t is the number of quarters in 3 years, that would be 4*3 = 12

Now, substituting, we get our answer:

$F=P(1+r)^t\\F=100(1+0.015)^{12}\\F=100(1.015)^{12}\\F=119.56$

The first answer choice is right, $119.56

3 0

3 years ago