6. CNBC reports, "Federal Reserve points to interest rate hike coming in March". Graphically show (in one graph) the short and long-term impact of this using the IS-LM model.
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- To https://aplia.apps.ng.cengage.com/ar/serviet/quiz?cx=bkhana-0031&quiz_action=takeQuiz&quiz_probGuid=... The following graph shows a decrease in short-run aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, the short-run aggregate supply curve shifts to the left from AS₁ to AS2, causing the quantity of output supplied at a price level of 100 to fall from $200 billion to $150 billion. ? 200 AS 175 AS₁ 150 125 100 75 50 25 0 PRICE LEVEL 0 50 300 200 250 QUANTITY OF OUTPUT 100 150 350 400 YoWhen the Federal Reserve reduces its policy interestrate, how, if at all, is the IS curve affected? BrieflyexplainSuppose the economy begins at full employment. Label this starting point as point "1." Then, suppose that, due to increased instability in the financial markets, a decrease in investor and consumer confidence occurs. Show the effects on your graph and label the new equilibrium point "2." Lastly, suppose the Federal Reserve wants the economy to return to full-employment as quickly as possible. Should the Fed intervene? If so, show the impact of successful monetary policy on your graph. Label this new equilibrium point "3."
- Use an ISLM model to analyze the effects of a money supply increase on the interest rate and GDP1. For each of the following questions, draw the Money Demand curve (MD) and Money Supply curve (MS) and label the equilibrium interest rate as i*. Also show how the MS- MD graph changes due to the given events and as a result how the equilibrium interest rate changes. (In your answer you should clearly state and show what happens to the MS and MD curves and also what happens to the interest rate). a) The Fed lowers the RRR b) Taxes decreaseWhat is meant by Liquidity Trap? Which policy is more effective in liquidity trap and why? Discuss its implications. Kindly answer this question as soon as
- Consider a closed economy where the goods and money markets are described by the following relationships: C = 200 + 0.9(Y – T) 1 = 400 – 15r M = 200 + Y – 100r G = 150 T = 100 M = 2000 P = 2 Where Cis planned consumption, / is planned investment spending, Tis government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. Department of Economics a) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships. b) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). Compute also the level of consumption and investment spending in equilibrium and check whether the actual level of spending matches the equilibrium level of output.Consider the following numerical example of the IS-LM model: C = 200 + 0.25YD I = 150 + 0.25Y - 1000i G = 250 T = 200 i = .05 (i has a bar over it) a. Derive the IS relation. (Hint: You want an equation with Y on the left side and everything else on the right.) b. The central bank sets an interest rate of 5%. How is that decision represented in the equations? c. What is the level of real money supply when the interest rate is 5%? Use the expression:(M>P) = 2Y - 8000i d. Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G. e. Now suppose that the central bank cuts the interest rate to 3%. How does this change the LM curve? Solve for Y, I, and C, and describe in words the effects of an expansion-ary monetary policy. What is the new equilibrium value of M/P supply? f. Return to the initial situation in which the interest rate set by the central bank is 5%. Now suppose that government spending increases to G = 400. Summarize the…Define the term Liquidity?
- Hello, I need help with a macroeconomics question. Thank you in advance! The answers are based on a short exerpt from the Federal Reserves press release from Feb 1, 2023 (attatchde below). 3. What decision did the committee reach regarding the federal funds rate? 4. What two tools would the Federal Reserve use to implement the decision from question 3? Be specific about the direction of the change for both tools.The diagram on the right shows the demand for money curve in a hypothetical economy. Suppose that the economy is initially at point E. Suppose that due to changes in expectations in the financial markets, the quantity of money demanded increases because of speculative reasons. This change would be associated with a movement from E to point EB C Interest Rate % EB Eo EA Quantity of Money MD (Y,P)Question 4. Consider an IS-LM model. Suppose the central bank increases the money supply by 5 percent. But the price level also increases increase by 10 percent. Part a What will be the change in LM curve? What will be the change in equilibrium interest rate and output? Explain properly using a graph?