4) a Suppose there is a decrease in consumer optimism about the future (often called a decrease in consumer confidence). Specifically assume that consumer confidence (co) falls. What will be the effect on consumption for any level of output and taxes? Show how the change in consumption behavior will affect the IS-LM diagram. What is the effect on output and the interest rate? b Suppose the Federal Reserve wanted to eliminate the effects on output you described in part (a). What could the Federal Reserve do to maintain constant output? In an IS-LM diagram, show how this policy, when combined with the decrease in consumer confidence, maintains constant output. How is investment ultimately affected by the combination of the decrease in confidence and the Federal Reserve policy? How is consumption affected?

4) a Suppose there is a decrease in consumer optimism about the future (often called a decrease in consumer confidence). Specifically assume that consumer confidence (co) falls. What will be the effect on consumption for any level of output and taxes? Show how the change in consumption behavior will affect the IS-LM diagram. What is the effect on output and the interest rate? b Suppose the Federal Reserve wanted to eliminate the effects on output you described in part (a). What could the Federal Reserve do to maintain constant output? In an IS-LM diagram, show how this policy, when combined with the decrease in consumer confidence, maintains constant output. How is investment ultimately affected by the combination of the decrease in confidence and the Federal Reserve policy? How is consumption affected?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6.
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Use the following information for all of the questions in this Check Point: Y $14 trillion C= $8 trillion | = $3 trillion TR = $1 trillion T= $3 trillion Enter your answers as whole numbers only (no decimals, no $). For example, if the answer is $7 trillion, you would only enter 7 as your a Question 1 What would government purchases be equal to? $ trillion. Question 2 What would private saving be equal to? $ trillion. Question 3 What would public saving be equal to? $ trillion.
As the price level falls, citizen save more money because they feel wealthier. Financial frictions, prevent the interest rates from falling in the market for loanable funds. If these financial fractions are significant, will the interest rate affect still cause the aggregated demand curve to slow down ward? ^ please explain in full. I will give a thumbs up for the correct answer.
Read Kiyotaki (1998). Consider the model in section 2 of the paper. Suppose there is no borrowing constraint (i.e., assume is arbitrarily large). Also assume that a = 1.2, B=0.9, y = 1.05, 8 = 0.1, and n = 4. (The notations of variables and parameters follow Kiyotaki (1998). Just in case, & denotes the lower case of Delta in the Greek alphabet.) Reference: Kiyotaki, N. (1998). "Credit and Business Cycles." The Japanese Economic Review, volume 49, issue 1, (You can obtain a free electronic copy of this article through the university library's website. If you do not know how, please ask the librarians.) Answer the following questions. pages 18-35.
6. Keynesian demand-side versus supply-side effects Consider an economy operating below its full-employment output level. The government wants to enact a reduction in income taxes in an effort to restore the economy to full-employment output. On the graph that follows, shift one of the curves to illustrate the impact of the income tax cut on aggregate supply (AS) and aggregate demand (AD) that is emphasized by Keynesian economists. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. PRICE LEVEL REAL GDP (Billions of dollars) SRAS AD AD SRAS
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1. Consider the following extensive form game: X (0, 3) A Y (3, 0) 1 2 X (3,0) C B (1, 1) Y (0, 3) (a) Write down the strategic or normal form equivalent of this game. (b) Find the set of rationalizable profiles.
2.2(a)How Permanent income hypothesis and life cycle hypothesis explain the differences between the long-run APC and the short-run APC?(b)Use an appropriate diagram based explain why the MEC-curve might overstate the additional investment that could be generated in an economy with a one-percent reduction in the rate of interest.
With the help of an IS-LM diagram, explain the effects of an increase in government spending on on current output, the current interest rate, current aggregate spending. (It’d be better to explain it with diagram, thank you!)
8. Given the following information: C = Ca + 0.8Yd Ip = 1900 - 40r G = 1800 NX = 700 - 0.14Y %D T= 200 + 0.20 Y Ca = 260 - 1Or Md/P = 0.25Y - 25r Ms/P = 2000 Find: 1. The equilibrium level of interest rate and output. 2. If Government expenditure increased by 100, find the new equilibrium level of interest rate and output