1. We have the following information for an economy. Yn = 1000, un 5%, n=2%, π² = π = 2%. Initially, risk premium, x = 1%. = N Yn 1000 Y 1050 730 170 G 150 i (%) 2 π (%) 3 u (%) x (%) 3 1 Explain the characteristics of a medium run equilibrium. For this situation described above, explain if it is a medium run equilibrium. If it is not a medium run equilibrium, explain what has happened that has caused the economy to deviate from the medium run equilibrium. Explain the appropriate monetary policy that the central bank needs to undertake to move the country to a medium run equilibrium. Explain the central bank's action in terms of adjustment of the nominal interest rate. For this situation illustrate the answer with suitable graphs of IS, LM and PC curves. Draw the IS-LM curves with real interest rate in the vertical axis

1. We have the following information for an economy. Yn = 1000, un 5%, n=2%, π² = π = 2%. Initially, risk premium, x = 1%. = N Yn 1000 Y 1050 730 170 G 150 i (%) 2 π (%) 3 u (%) x (%) 3 1 Explain the characteristics of a medium run equilibrium. For this situation described above, explain if it is a medium run equilibrium. If it is not a medium run equilibrium, explain what has happened that has caused the economy to deviate from the medium run equilibrium. Explain the appropriate monetary policy that the central bank needs to undertake to move the country to a medium run equilibrium. Explain the central bank's action in terms of adjustment of the nominal interest rate. For this situation illustrate the answer with suitable graphs of IS, LM and PC curves. Draw the IS-LM curves with real interest rate in the vertical axis

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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210 " 40 " What kind of externality is present in this market? O a. A negative consumption externality of x-10. Ob. A positive consumption externality of x = 20. Oc. A positive consumption externality of x = 10. Od. A negative consumption externality of x-20. #1 • Supply(P-40+Q₂) 10 " Demand (P-200-Q Social Marginal Benefit P-20-9. 200 9 210 Q Suppose the government imposas a policy (tax or subsidy) such that the new Supply curve lies on the Social Marginal Cost curve. What area represents the government revenue or expenditure from this policy? Ⓒa.DIGH Ob. E-H ⒸH+G+D+E+H+K Ⓒd.E+HIK
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