2. Draw the IS-LM curves such that the LM curve slopes up and the IS curve slopes down and use the graph to answer the following questions: a. Using your own words, describe why the LM and IS curves are positively and negatively sloped, respectively. b. Graphically show the effect of an expansionary fiscal policy that increases government spending. c. Explain economically how fiscal policy increases real output (Y). d. Is there a crowding-out effect? If yes, explain why. e. Indicate the point at which we have the full effect of the fiscal multiplier. f. Describe economically two cases in which the crowding-out effect is eliminated.

2. Draw the IS-LM curves such that the LM curve slopes up and the IS curve slopes down and use the graph to answer the following questions: a. Using your own words, describe why the LM and IS curves are positively and negatively sloped, respectively. b. Graphically show the effect of an expansionary fiscal policy that increases government spending. c. Explain economically how fiscal policy increases real output (Y). d. Is there a crowding-out effect? If yes, explain why. e. Indicate the point at which we have the full effect of the fiscal multiplier. f. Describe economically two cases in which the crowding-out effect is eliminated.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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