a. If the multiplier equals 3, what is the new level of GDP?$b. Suppose that as a result of the increase in GDP the price level in Newland also rises, causing the demand for money to increase by$30 billion. Show the new money demand, labelled MD2, in graph A above. Plot only the endpoints of the curve above.billionc. What will be the new interest rate?%d. In graph B, by how much will investment spending change?billion.e. Given the same value of the multiplier, what will be the new level of GDP?billion Suppose that GDP in Newland is $600 billion and the government increases spending by $20 billion.Interest rate (%)87650Graph A30 60 90 120 150 180 210 240 270 300Quantity of money (billions of dollars)MSMD₁ToolsMD₂Interest rate (%)12111010076543210Graph B10 20 30 40 50 60 70 80 90 100Investment spending (billions of dollars)14

Money market: As the central bank issues fresh currency, they determine the level of money supply in…

a. If the multiplier equals 3, what is the new level of GDP? $ billion LA b. Suppose that as a result of the increase in GDP the price level in Newland also rises, causing the demand for money to increase by $30 billion. Show the new money demand, labelled MD2, in graph A above. Plot only the endpoints of the curve above. c. What will be the new interest rate? %

a. If the multiplier equals 3, what is the new level of GDP? $ billion LA b. Suppose that as a result of the increase in GDP the price level in Newland also rises, causing the demand for money to increase by $30 billion. Show the new money demand, labelled MD2, in graph A above. Plot only the endpoints of the curve above. c. What will be the new interest rate? %

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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