Appendix A Graplıs for Q1.2 and Q22ReIresRealresvesinertveine(a)(b)RealNomiISIerestRueIrerestRaLMLMAppendix C Graphs for Q2.4GDPGDP(d)ExpenditureExpenditureActual ExpenditureActual ExpendturePEPEAppendix B Graphs for Q1.4 and Q2.3PE'PE'PriceProelvelvelIncomeOuputIncomeOutput(a)(b)GOPGDP(a)(b)PricelevelPricelevelGOPGDPY,(e)(d) C = 50 + 0.9 · (Y – T)I = 50 – 1000 - rwhere Y is real output and r is the real interest rate. Government purchases and taxes areĞ = 500, T = 500.The money market equilibrium curve-or LM curve-iswhere P is the price level and i is the nominal interest rate. The Central Bank (CB) is initially supplyingM = 10000 units of money, and expected inflation is zº = 0.05. The long-run aggregate supply (LRAS) isY, = 1000.Suddenly, there is a climate shock that changes the marginal propensity to consume (MPC), and theconsumption function changes toC' = 50 + 0.8 · (Y – T).1. Explain how the short-run values of (r, i) are determined before the climate shock.2. Which, if any, of the graphs from Appendix A best depicts the short-run change in the interest rate(s)due to the climate shock? Explain.3. Which, if any, of the graphs from Appendix B best depicts the short-run change in output and pricedue to the climate shock? Explain.4. Which, if any, of the graphs from Appendix C best depict the change in the Keynesian cross due tothe climate shock? Explain.

Given, C= 50+ 0.9 (Y-T^)I=50-1000.rG^=500, T^=500

1. Explain how the short-run values of (r,i) are determined before the climate shock. 2. Which, if any, of the graphs from Appendix A best depicts the short-run change in the interest rate(s) due to the climate shock? Explain. 3. Which, if any, of the graphs from Appendix B best depicts the short-run change in output and price due to the climate shock? Explain.

1. Explain how the short-run values of (r,i) are determined before the climate shock. 2. Which, if any, of the graphs from Appendix A best depicts the short-run change in the interest rate(s) due to the climate shock? Explain. 3. Which, if any, of the graphs from Appendix B best depicts the short-run change in output and price due to the climate shock? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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