Attempt all the questions. Try to be precise and avoid irrelevant explanation. Clearly illustrate your answers graphically wherever required. Q.1. Why are fiscal policy multipliers smaller in magnitude in variable price version of the Keynesian model than in the fixed price IS-LM model? Q.2. Within the variable price version of Keynesian model, analyze impact effect of an adverse supply shock also explain the final outcome on employment under different slopes of Aggregate Demand curve. Q.3. Explain the role of contractionary monetary policy in a small open economy under: (i) Flexible exchange rate and imperfect capital mobility. (ii) Fixed exchange rate and imperfect capital mobility. (iii) Flexible exchange rate and perfect capital mobility.

Attempt all the questions. Try to be precise and avoid irrelevant explanation. Clearly illustrate your answers graphically wherever required. Q.1. Why are fiscal policy multipliers smaller in magnitude in variable price version of the Keynesian model than in the fixed price IS-LM model? Q.2. Within the variable price version of Keynesian model, analyze impact effect of an adverse supply shock also explain the final outcome on employment under different slopes of Aggregate Demand curve. Q.3. Explain the role of contractionary monetary policy in a small open economy under: (i) Flexible exchange rate and imperfect capital mobility. (ii) Fixed exchange rate and imperfect capital mobility. (iii) Flexible exchange rate and perfect capital mobility.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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b) use the "Lucas Island Model" to provide an explanation as to why money is leading and pro-cyclical according to the New Classical Economists. Be sure to include a completely labeled AS/AD diagram and an explanation of what we mean exactly by a Lucas Aggregate supply curve (along with the intuition underlying it). Finish your essay by discussing whether or not money is neutral in this New Classical model and why. ANSWER I WROTE The Lucas Island Model retains the assumption of rapid market clearing despite being based on incomplete information. The Lucas Island Model makes the same assumption as the traditional model that the money supply will rise before prices start to rise. Take a person, let's say a tailor. After observing the fabric market for some time, the tailor detects a rise in the cost of cloth. He believes that the relative price of cloth has increased because he is unaware of what has occurred to the prices of all other commodities, which is what we refer to as price…
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indentified Qe but not the rest
Please answer all components of the question!! 1. Draw a correctly labeled AD/AS graph and a correctly labeled Phillips curve graph showing an economy with a recessionary gap. Label the initial equilibrium on both graphs point “A’. (i) Suppose that policymakers increase government spending resulting in full employment. Show the result of this fiscal policy action on both graphs. Label this new equilibrium point “B”. Identify what happens to inflation and unemployment in the short-run. (ii) Suppose that policymakers now cut consumer taxes resulting in a positive output gap. Show the result of this fiscal policy action on both groups. Label the new equilibrium point “C”. Identify what happens to employment in the short-run. (iii) At point “C”, what will happen to wages and resource prices in the long-run? Explain. (iv) Given your answer to question #3, show how both models adjust in the long-run and label the final equilibrium point “D”. Identify what will happen to inflation and…
Question 13 Include correctly labeled diagrams, if useful or required, In explaining your answers. A correctly labeled dl question prompts you to 'Calculate," you must show how you arrived at your final answer. Vander's economy is in short-run equilibrium with an inflationary gap of $360 billion, and the marginal propensity to save 0.1. the expected inflation rate is 2% and the natural rate of unemployment is 4% (b) Assume the government takes no policy action with regard to the state of Vander's economy. (i) What will happen to the actual rate of unemployment in the long run? Explain.(it) The flow will the long-run adjustment process be represented in the Phillips curve model? Explain. (c) Assume that instead of waiting for the long-run adjustment, the government of Vander is considering USA fiscal policy to addresses the inflationary gap of 360 billion(ii) How will the effect of the government's action in part (c)(i) be represented in the Phillips curve model(Ili) If the government…
help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all working
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Consider a keynesian macromodel Y=(C0+G+I) / (1-c) where C0 is autonomus consumption, G is government consumption expenditure, I is investment expenditure, c is the marginal propensity to consume. Assume constant marginal productivity of labor. What will be the result of an increasing government consumption expenditure in this module, if not other paramiters are changed? a. Lower investment. b. Higher employment. c. Higher inflation. d. Lower employement.
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hi, posting this again. will you let me know if these are correct? 15- In the Keynesian range of the AS curve, increases in taxes will raise unemployment- true 16- If the MPC is .95 and taxes are increased by $20, AD will increase by $380- true 17- If Y* is more than Yfe, the economy is in the classical range of the AS curve- true