Answer it asap i will upvote you if you r not explain properly then i will downvote you The following graph plots equilibrium in the money market at an interest rate of 3% and a quantity of money equal to $15 billion.Show the impact of the increase in government purchases on the interest rate by shifting one or both of the curves on the following graphINTEREST RATEMoney SupplyMore Demandknown as the1016MONEY (one of dollars)29Money Demand181Money SupplySuppose that for every increase in the interest rate of one percentage point, the level of investment spending declines by $0.5 billion. Based on thechanges made to the money market in the previous scenario, the new interest rate causes the level of investment spending to byTaking the multiplier effect into account, the change in investment spending will cause the quantity of output demanded to27byat every price level. The impact of an increase in government purchases on the interest rate and the level of investment spending iseffect. 7. Fiscal policy, the money market, and aggregate demandSuppose there is some hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the $0.50 they have leftover. The following graph plots the economy's initial aggregate demand curve (AD)).Suppose now that the government increases its purchases by $2.5 billion.Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (ADS) after the multiplier effect takes place.Hint: Be sure the new aggregate demand curve (AD₂) is parallel to AD,. You can see the slope of AD, by selecting it on the following graph.112PRICE LEVEL81001049100NP.100110 112 THEOUTPUT (ons of dollars)104110

John Maynard Keynes devised the AD-AS model to explain changes in the economy's production and price…

7. Fiscal policy, the money market, and aggregate demand Suppose there is some hypothetical economy in which households spend 10.50 of each additional dollar they earn and save the $0.50 they have left over. The following graph plots the economy's initial aggregate demand curve (AD₁). Suppose now that the government increases its purchases by $2.5 billion. Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (ADS) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (AD₂) is parallel to AD,. You can see the slope of AD, by selecting it on the following graph. PRICE LEVEL 8 100 104 9 100 NP. 100 100 110 112 THE 116 OUTPUT (ons of dollars) 104

7. Fiscal policy, the money market, and aggregate demand Suppose there is some hypothetical economy in which households spend 10.50 of each additional dollar they earn and save the $0.50 they have left over. The following graph plots the economy's initial aggregate demand curve (AD₁). Suppose now that the government increases its purchases by $2.5 billion. Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (ADS) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (AD₂) is parallel to AD,. You can see the slope of AD, by selecting it on the following graph. PRICE LEVEL 8 100 104 9 100 NP. 100 100 110 112 THE 116 OUTPUT (ons of dollars) 104

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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