Consider an economy with a constant nominal money supply, a constant level of real outout Y= 400, and a constant real interest rate r 10%. Suppose that the income elasticity ofmoney demand is 1.20 and the interest elasticity of money demand is-0.10.a. By what percentage does the equilibrium price level differ from its initial value if output increases to Y 480.00 (and rremaine at 10%)?%AP=(enter your result as a percentage rounded to two decimal places).b. By what percentage does the equilibrium price level differ from its initial value if the real interest increases to r-12.50% (and Y remaina at 400)?%AP (enter your result as a percentage rounded to two decimal placea).c. Suppose that the real interest rate inoreases to re 12.50%. By what percentage would real output have to increase for the equilibrium price level to remain at its initial value?%AY- T(enter your reault an a percentage rounded to two decimal places)

In the macroeconomic model of IS-LM, the LM curve establishes a relation between the national income…

Consider an economy with a constant nominal money supply. a constant level of real output Y 400, and a constant real interest rater 10%. Suppose money demand is 1.20 and the interest elasticity of money demand is -0.10. a By what percentage does the equilibrium price level difer trom its intial value if output increases to Y 480.00 (and rremaine at 10N? SAP- P-(enter your reault as a percentage rounded to hwo decimal placea) b. By what percentage does the equilbrium price level differ from its initial value if the real interest increases to r12.50% (and Y remaina at 400y? SAP (enter your reault asa peroentage rounded to hwo decimal placea) e. Suppose that the real interest rate inoreases to r12.50% By what percentage would real output have to increase for the equlibrium price level to remain at its intial value? teg deomal placea)

Consider an economy with a constant nominal money supply. a constant level of real output Y 400, and a constant real interest rater 10%. Suppose money demand is 1.20 and the interest elasticity of money demand is -0.10. a By what percentage does the equilibrium price level difer trom its intial value if output increases to Y 480.00 (and rremaine at 10N? SAP- P-(enter your reault as a percentage rounded to hwo decimal placea) b. By what percentage does the equilbrium price level differ from its initial value if the real interest increases to r12.50% (and Y remaina at 400y? SAP (enter your reault asa peroentage rounded to hwo decimal placea) e. Suppose that the real interest rate inoreases to r12.50% By what percentage would real output have to increase for the equlibrium price level to remain at its intial value? teg deomal placea)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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COURSE: MACROECONOMICS - IS-LM and/or MUNDELL FLEMING MODELS Refer to 2 different models (and/or conditions) under which an increase in the amount of money circulating in the economy has a NULL impact on GDP. Then, refer to 2 different models (and/or conditions) under which an increase in the amount of money circulating in the economy has a MAXIMUM impact on GDP. EXPLAIN very briefly the mechanism by which each model generates that NULL or MAXIMUM impact on GDP. Hint: 2 conditions under increase of M (money) and how impact null (zero) and maximum on GDP. Example, considering both fiscal or monetary policies or liquidity trap model. Please graph and explain on detail both cases.
What could cause the following shift? O Increase in GDP. O Expansionary fiscal policy. O Decrease in future MPK. All of the above. FE IS LM
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Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy's multiplier is 4. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? In what direction and by how much will it eventually shift?
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