C = 100 + 0.5 - (Y –Ť)I = 500 – 1000 -rwhere Y is real output and r is the real interest rate. Government purchases and taxes areG = 500, Î= 100.The LM (money market equilibrium) curve isYwhere P is the price level and i is the nominal interest rate. The Central Bank (CB) is initially supplyingM = 8000 units of money, and expected inflation is a = 0.Assume that the long-run equilibrium level of output is Y = 2000. Short-run equilibrium output is initiallyat the same level (Y = 2000).Suddenly, news of a new world-beating super-vaccine raises expected inflation to = 0.05.1. Explain how the long-run values of (r, i) are determined before the vaccine news shock.2. Which, if any, of the graphs from Appendix A best depicts the long-run change in the interest rate(s)due to the vaccine news shock? Explain.3. Explain how the long-run values of (Y, P) are determined before the vaccine news shock.Appendix A Graphs for Q1.2 and Q2.3RealRealIerestIreresaRateRateIr)Tir)SavingsvesimentSavinguInvesinent(a)(b)NominalinterestRealISnterestRateRateLMLMi=rGDPGDP(e)(d)

Given; C=100+0.5(Y-T) I= 500-1000r G=500 T=100 Y=2000 LM Curve is; MP=Y5i where; P=…

C = 100 + 0.5 - (Y – T) 1 = 500 – 1000 -r where Y is real output and r is the real interest rate. Government purchases and taxes are G=500, T = 100. The LM (money market equilibrium) curve is M Y P where P is the price level and i is the nominal interest rate. The Central Bank (CB) is initially supplying M = 8000 units of money, and expected inflation is xª = 0. Assume that the long-run equilibrium level of output is Y = 2000. Short-run equilibrium output is initially at the same level (Y = 2000). Suddenly, news of a new world-beating super-vaccine raises expected inflation to x = 0.05. 1. Explain how the long-run values of (r, i) are determined before the vaccine news shock. 2. Which, if any, of the graphs from Appendix A best depicts the long-run change in the interest rate(s) due to the vaccine news shock? Explain. 3. Explain how the long-run values of (Y, P) are determined before the vaccine news shock. Appendix A Graphs for Q1.2 and Q2.3 ir Saving nvesment Savings mesnet (b) erest Rate GDP GDP (4)

C = 100 + 0.5 - (Y – T) 1 = 500 – 1000 -r where Y is real output and r is the real interest rate. Government purchases and taxes are G=500, T = 100. The LM (money market equilibrium) curve is M Y P where P is the price level and i is the nominal interest rate. The Central Bank (CB) is initially supplying M = 8000 units of money, and expected inflation is xª = 0. Assume that the long-run equilibrium level of output is Y = 2000. Short-run equilibrium output is initially at the same level (Y = 2000). Suddenly, news of a new world-beating super-vaccine raises expected inflation to x = 0.05. 1. Explain how the long-run values of (r, i) are determined before the vaccine news shock. 2. Which, if any, of the graphs from Appendix A best depicts the long-run change in the interest rate(s) due to the vaccine news shock? Explain. 3. Explain how the long-run values of (Y, P) are determined before the vaccine news shock. Appendix A Graphs for Q1.2 and Q2.3 ir Saving nvesment Savings mesnet (b) erest Rate GDP GDP (4)

Macroeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506756

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter12: Fiscal Policy, Incentives, And Secondary Effects

Section: Chapter Questions

Problem 3CQ

See similar textbooks

Similar questions

Mj
Suppose the economywide demand for money is given by: M = P(0.2Y – 25,000i). The price level Pequals 3, and real output Y equals 8,000. At what value should the Fed set the nominal money supply if it wants to set the nominal interestrate at 2 percent?
The central bank of the Mushroom Kingdom announces that the federal funds rate will be equal to 5% during the next two years, and after these two years it will fall to 3% for the next eight years. If the inflation rate is expected to be 1% throughout the entirety of this period, what will be the long-run expected real interest rate during these ten years? Select one: a.2.40% b.4.40% inal Exam c.7% d.33% Next page
Looking at the macroeconomic statistics for Kellytopia, you discover that at the beginning of the year, the national money supply was equal to $200 billion and by the end of the year it was equal to $193 billion. You also found out that the inflation rate in Kellytopia was-5%. In this case, you would expect the LM curve to shift up and to the left as the real money supply rises. O shift up and to the left as the real money supply falls O shift down and to the right as the real money supply falls. O shift down and to the right as the real money supply rises.
C = 100 + 0.5 · (Y – T) I = 500 – 1000 - r where Y is real output and r is the real interest rate. Government purchases and taxes are Ğ = 500, T = 100. The LM (money market equilibrium) curve is MY P 5i where P is the price level and i is the nominal interest rate. The Central Bank (CB) is initially supplying M = 8000 units of money, and expected inflation is a = 0. Assume that the long-run equilibrium level of output is Y = 2000. Short-run equilibrium output is initially at the same level (Y = 2000). Suddenly, news of a new world-beating super-vaccine raises expected inflation to = 0.05. 1. Suppose the government (not the CB) wants to stabilise the shock in the short-run. Explain whether it should increase the government deficit (AĞ > AT) or reduce it (AĞ < AT), and how it works. 2. Now suppose the government doesn't do anything, and the CB wants to stabilise the shock in the short-run. Explain whether it should decrease or increase money supply M if it wants to bring output Y back to…
please do all the questions
Only D please
C = 100 + 0.5 - (Y – T) I = 200 – 1000 - r where Y is real output and r is the real interest rate. Government purchases and taxes are G= 300, Ť= 200. The LM (money market equilibrium) curve is M Y 10i where P is the price level and i is the nominal interest rate. The Central Bank (CB) is initially supplying M = 2000 units of money, and expected inflation is a“ = 0.02. Assume that the long-run equilibrium level of output is Y = 1000. Short-run equilibrium output is initially at the same level (Y = 1000). Suddenly, news of a new world-beating super-vaccine raises the investment function to I = 250 – 1000 -r Question 1 Derive the long-run equilibrium values of output Y, consumption C, private and public savings Sprivate and Spublie, investment I, the real and nominal interest rates (r, i) and price P, before and after the vaccine news shock. In particular: 1. Explain how the long-run values of (r, i) are determined before the vaccine news shock. 2. Which, if any, of the graphs from…
Correct answer will be surely upvoted.Please answer fast i need it ASAP.
Suppose the money demand function is Md/P = 1000+ 0.2Y - 1000 (r + π²). and Y = 2000, r = .06, π = .04, and Ms is 2600. Suppose the real interest rate rises to 0.11, and expected inflation rises to 0.09, but Y and Ms are unchanged. What would the inflation rate be? Select one: a. 4% b. 10% O c. 6% d. 8%
3. An economy has full-employment output of 1000. The other aggregates are as follows Cd = Id = 200+0.8(YT) - 500r 200-500r G = 196 T = 20+0.25Y Money demand is Md P = 0.5Y -250(r+π²) where expected rate of inflation л² = 0.10. The nominal supply of money M = 9890. 3.1 What are the general equilibrium values of the real interest rate, price level, consumption, and and investment?. 3.2 Suppose that government purchases are increased to G = 216. What are the new gen- eral equilibrium values of the real interest rate, the price level, consumption, and and investment?.
Now, consider an economy in which the demand for money is of the formY / (1 + it) for t = 0, 1, 2, · · · , where output is 150 and it denotes the nominal interest rate inperiod t. The real interest rate, denoted r, is constant and equal to 4%. In period0 and 1, the money supply is 100 and people expect that money supply wouldbe 100 forever. People have rational expectations. In period 2, the central banksurprises people and sets the money supply will grow at 2 percent forever, that is,M0 = 100, M1 = 100, M2 = (1.02)M1, M3 = (1.02)M2, and so on. A . Find the inflation rate, nominal interest rate, real money balance in period 1,and expected inflation in period 2, given the information available in period1, π1, i1, M1 / P1 and, E1π2. B . Find the inflation rate, nominal interest rate, real money balance in period 2, and expected inflation in period 3, given the information available in period 2, π2, i2, M2 / P2 and E2π3. C . Compare E1π2 and π2.