宏观经济学-课后思考题答案_史蒂芬威廉森010

1、chapter 10 a monetary intertemporal model: money, prices, and monetary policy ? ? teaching goals analysis of a monetary economy can become quite complex. modern economies require significant specialization to function well. such specialization requires a commonly accepted medium of exchange. money s

2、erves this function. although it matters quite a lot that we have money, the actual quantity of money in circulation is not very important. this fact emerges because the quantity of money is neutral, if not in the very short run, certainly in the long run. in the monetary intertemporal model, change

3、s in the money supply affect the level of prices, but do not otherwise affect economic outcomes; money is neutral. real factors may also affect the price level. the price level adjusts to keep money demand and money equal. disturbances that change the equilibrium levels of output and the real intere

4、st rate therefore change the price level. shifts in preferences for money holding also affect the price level. the principle role of monetary policy in the monetary intertemporal model is to control the level of prices. a popular goal of policy is to stabilize the price level in response to shocks t

5、o the economy. however, the central banks ability to stabilize prices may be compromised if money demand does not behave in a predictable manner. it is also important for policy to set targets and adhere to particular policy rules. ? ? classroom discussion topics the payments technology has continua

6、lly advanced over time, but the rate of advance has accelerated in the era of computer technology. ask the students for examples of advances in this technology beyond the routine use of cash and the writing of paper checks. some obvious possibilities include the use of atms, computer and telephone b

7、anking, the use of prepaid phone cards and other forms of smart card technologies. students are also likely to discuss the existence of credit cards and the ever more sophisticated ways to use credit cards and protect against fraud. as one example, there is the use of credit cards to pay for purchas

8、es over the internet. in discussing these possibilities, it is also important to distinguish the payments technology from the proper measurement of the money supply. for example, it is important to distinguish between payment arrangements that are uses of credit, like the use of credit cards, from u

9、ses of money, like cash and transaction deposits. standard macroeconomic analysis, like that of this chapter, emphasizes central banks control of the quantity of money in circulation. however, most contemporary discussions of u.s. monetary policy focus on the federal reserves control of “interest ra

10、tes.” this chapter offers plenty of opportunities to discuss real life events. for example, discuss the upcoming meeting of the fomc, what it decides on, what information it uses, and what it may do. 102 williamson macroeconomics, third edition in the monetary intertemporal model, the real interest

11、rate is market determined and cannot be influenced by central bank behavior. ask the students whether they believe a simplistic view of popular press coverage that seems to refute the notion that the interest rate is market determined. note the importance of the distinction between the federal funds

12、 rate and the sort of real interest rates that motivate saving and investment choices. is it possible that the fed adjusts the federal funds rate to more closely resemble other market interest rates? is it possible to control the nominal interest rate while being unable to influence the real interes

13、t rate? even if the fed is able to control one very narrowly defined real interest rate, does this mean that models like those in this chapter are not useful descriptions of reality? ? ? outline i. functions of money a. medium of exchange b. store of value c. unit of account ii. measuring the money

14、supply a. the monetary base 1. currency outside the fed 2. depository institution deposits at the fed b. m1 1. currency held by the public 2. travelers checks 3. demand deposits 4. other checkable deposits c. m2 1. savings deposits 2. small-denomination time deposits 3. retail money market mutual fu

15、nds d. m3 1. large-denomination time deposits 2. institutional money market mutual funds 3. repurchase agreements 4. eurodollars iii. introduction to the monetary intertemporal model a. the need for money 1. single coincidence of wants 2. double coincidence of wants 3. the cash-in-advance model b. r

16、eal and nominal interest rates 1. nominal bonds 2. the nominal interest rate 3. the fisher relationship chapter 10 a monetary intertemporal model: money, prices, and monetary policy 103 c. representative consumer 1. the cash-in-advance constraint 2. banking service cost function 3. optimal choice of

17、 banking services d. representative firm 1. the cash-in-advance constraint 2. banking service cost function 3. optimal choice of banking services e. money and the government budget constraint iv. competitive equilibrium in the monetary intertemporal model a. graphical apparatus b. a change in the le

18、vel of the money supply 1. sources of changes in the money supply a. helicopter drops: taxes/transfers b. open-market operations c. seigniorage 2. classical dichotomy 3. neutrality of money c. a change in current total factor productivity 1. real effects 2. price-level effects d. shifts in money dem

19、and 1. sources a. information technology and banking costs b. new financial instruments c. government regulations d. perceived riskiness of banks e. changes in circumstances in the banking system 2. neutrality vis-vis real variables 3. price-level effects e. monetary policy rules 1. under perfect in

20、formation 2. money supply targeting 3. nominal interest rate targeting 4. the taylor rule ? ? textbook question solutions questions for review 1. money serves as a medium of exchange, a store of value, and a unit of account. 2. measures of the money supply include m0, m1, and m2. the monetary base,

21、m0, includes all currency outside of currency held by the federal reserve, and deposits of depositary institutions at the federal reserve. m1 includes all currency held by the public (as opposed to bank vaults, the fed, and the u.s. treasury), plus travelers checks, demand deposits, and other checka

22、ble deposits. m2 includes all of m1 plus savings deposits, small-denomination time deposits, and retail money market mutual funds. 104 williamson macroeconomics, third edition 3. use of money, as opposed to barter in goods or credit, solves the problem of the double coincidence of wants. 4. the nomi

23、nal rate of interest is approximately equal to the real rate of interest plus the rate of inflation. the exact relationship is: (1) 1 (1) r r i + += + 5. the real rate of return on money is approximately equal to minus the rate of inflation. if we define the real rate of return on money as , m r the

24、n the exact relationship is: 1 1 (1) m r i += + 6. the demand for money stems from the desire of consumers to hold money to make purchases. those can be made with a debit card as well, but this is costly, so the consumer decides in advance how much money to withdraw from the bank account. in additio

25、n, firms demand money in a similar way so that they can purchase investment goods. 7. a permanent, once-and-for-all increase in the money supply has no effect on the real economy. that is, money is neutral. the only effect of the increase in the money supply is a permanent, proportionate increase in

26、 the price level. 8. the government can change the money supply through a temporary tax cut (a helicopter drop), an open-market operation, and seigniorage. 9. the steady-state effects of an increase in the money growth rate include an increase in the rate of inflation, a reduction in output, a reduc

27、tion in employment, an increase in the real wage, and an increase in the nominal interest rate. 10. a change in the cost of banking services alters the trade-off between withdrawing money in advance for purchases and using the debit card. for example, if the cost decreases, then consumers and firms

28、will use debit cards more and will withdraw less cash, thus reducing the demand for money. 11. money demand can increase if incomes rise (households then want to consume more and thus need more cash, firms want to buy more investment goods and also need more cash), if the nominal interest rate is lo

29、wer, as then the opportunity cost of holding money is lower, and if prices are higher, as money demand is formulated in nominal terms. money demand can be shifted by anything that would alter the cost of banking services, such as: new information technologies that lower the cost of accessing bank ac

30、counts, new financial instruments that lower the cost of banking, changes in bank regulation, changes in the perceived risk of banks, and changes in various circumstances in the banking system. 12. as money is neutral in this model, there is no real goal of any relevance, only a nominal goal. this w

31、ould be to keep inflation low in order to achieve nominal interest rates as low as possible to prevent households and firms to be constrained by the cash-in-advance constraint. 13. a monetary policy rule establishes the money supply as a function of observable aggregates. three examples are money su

32、pply targeting, nominal interest rate targeting, and the taylor rule. chapter 10 a monetary intertemporal model: money, prices, and monetary policy 105 14. money supply targeting implies no change of money supply in response to any of the three shifts, leading to price changes and the failure of the

33、 price stability goal. nominal interest rate targeting achieves price stability in response to money demand shocks, but not to output demand or supply shocks. the taylor rule has ambiguous consequences with the model we have studied so far. problems 1. bank service function with fixed cost. (a) this

34、 fix cost can be interpreted as the cost of obtaining a debit card, which is independent of the cost of using it. (b) none, as hx is unaffected. (c) it will change the level of money demand, but it has no impact on the slope of money demand or on its shifts in reaction to various circumstances. inde

35、ed, the slope of h(x), or j(r), is still the same. (d) with a higher d, households make the same choice of banking services, as x must be such that hx = r, and hx has not changed. the same applies to the firm. thus, there is change to the demand for money and no change to the price level. 2. zero no

36、minal interest rate. (a) now hx = 0, which can only be achieved at x = 0. (b) none. banks are not used at all. (c) household and firms have no reason to hold any bonds, as their return is the same as money and it costs to use the debit card. so everything is done with cash, and economic agents are n

37、ot constrained by the cash-in-advance constraint anymore. however, in order to achieve a zero nominal interest rate, it implies that the inflation rate should be the opposite of the real interest rate, that is negative. this happens only rarely. 3. government spending in the monetary intertemporal m

38、odel. (a) the real effects of a temporary increase in government spending are the same as those in the real intertemporal model. output and employment increase, the real interest rate increases, and the real wage decreases. the new consideration is the effect on the price level. the increase in inco

39、me causes money demand to increase. the increase in the real interest rate causes the demand for money to decrease. with a fixed supply of money, the price level must change to keep money supply and money demand equal. if the income effect on money demand is stronger, then prices must decrease. if t

40、he interest rate effect on money demand is stronger, then prices must increase. (b) the real effects of a permanent increase in government spending are the same as those in the real intertemporal model. output and employment increase, the real interest rate decreases, and the real wage decreases. in

41、 this case the effects of the increase in income and the decrease in the interest rate both work to increase money demand. in this case, the price level unambiguously declines. 4. the real effects of a decrease in the capital stock are the same as those in the real intertemporal model. the decrease

42、in k leads to an increase in the real interest rate and a decrease in the real wage. the effects on output and employment are uncertain, although it may be somewhat more likely that output will decrease. a decrease in output along with an increase in the real interest rate both work to decrease mone

43、y demand. therefore, the price level would need to increase to keep money supply and money demand equal. 5. the current-period real effects of the future increase in total factor productivity are the same as those predicted by the real intertemporal model. output and employment increase, the real wa

44、ge decreases, and the real interest rate increases. the increase in output increases money demand and the current price level increases. 106 williamson macroeconomics, third edition 6. the increased presence of atms would allow consumers to get by holding less money. therefore, this disturbance shif

45、ts the money demand curve to the left, so the price level would increase to keep money demand and money supply equal. 7. implementing a nominal interest rate rule. (a) this increase in housing construction may arise from household confidence, for example after an increase in the stock price. thus we have a temporary increase in money demand with a reduction in prices. to lower the nominal interest rate, the monetary authority increases the money supply, which raises prices to the previous level. price stabilization is successful. (b) this is like a drop in current