Consider the economy of Panda Republic which is characterized by the following IS-LM model. S equation: Y = C(Y - T) + I(Y , i ) + G LM equation: i = i Hint: You must draw the graph to answer the following questions) 1. In 2008, consumer confidence fell significantly due to fears of recession. How would this affect the economy? Describe graphically. Answer: The fall in consumer confidence would [ Select ] aggregate consumption. Graphically, the [Select] [ Select ] . As a result, the output ( Select] Given the interest rate, investment ( Select ] The economy fell into a recession. . In response, the government implemented an expansionary fiscal policy by cutting taxes. Describe graphically the effects on the economy.
Consider the economy of Panda Republic which is characterized by the following IS-LM model. S equation: Y = C(Y - T) + I(Y , i ) + G LM equation: i = i Hint: You must draw the graph to answer the following questions) 1. In 2008, consumer confidence fell significantly due to fears of recession. How would this affect the economy? Describe graphically. Answer: The fall in consumer confidence would [ Select ] aggregate consumption. Graphically, the [Select] [ Select ] . As a result, the output ( Select] Given the interest rate, investment ( Select ] The economy fell into a recession. . In response, the government implemented an expansionary fiscal policy by cutting taxes. Describe graphically the effects on the economy.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![Consider the economy of Panda Republic which is characterized by the following IS-LM model.
IS equation: Y = C(Y - T) + I(Y , i ) + G
LM equation: i = i
(Hint: You must draw the graph to answer the following questions)
a. In 2008, consumer confidence fell significantly due to fears of recession. How would this affect the economy? Describe graphically.
Answer:
The fall in consumer confidence would [ Select ]
aggregate consumption. Graphically, the [Select]
v curve shifted
[ Select ]
. As a result, the output ( Select]
Given the interest rate, investment [ Select]
The economy fell into a recession.
b. In response, the government implemented an expansionary fiscal policy by cutting taxes. Describe graphically the effects on the economy.
Answer:
The tax cut would [ Select ]
consumption, shifting the [Select]
[ Select ]
.As a result.
curve
the output
[ Select ]
Given the interest rate, investment ( Select ]
The economy would get out of the recession.
c. Suppose that the government was running a large budget deficit, constraining the use of an expansionary fiscal policy. In fact, the government had to implement a
contractionary fiscal policy to reduce the deficit. However, the Fed was able to use its expansionary monetary policy. The interest rate was cut. Describe graphically
the effects of this policy mix on the economy.
Answer:
The fiscal contraction would shift [ Select ]
The monetary expansion would shift [ Select ]
. As a result, the
interest rate [ Select ]
v while output and investment ( Select]
. If output [ Select ]
investment would [ Select ]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F500ad1db-a584-456e-b767-a13c304d1baf%2F337e9320-32aa-4319-8abf-8622b46ccc54%2F6q79yfs_processed.png&w=3840&q=75)
Transcribed Image Text:Consider the economy of Panda Republic which is characterized by the following IS-LM model.
IS equation: Y = C(Y - T) + I(Y , i ) + G
LM equation: i = i
(Hint: You must draw the graph to answer the following questions)
a. In 2008, consumer confidence fell significantly due to fears of recession. How would this affect the economy? Describe graphically.
Answer:
The fall in consumer confidence would [ Select ]
aggregate consumption. Graphically, the [Select]
v curve shifted
[ Select ]
. As a result, the output ( Select]
Given the interest rate, investment [ Select]
The economy fell into a recession.
b. In response, the government implemented an expansionary fiscal policy by cutting taxes. Describe graphically the effects on the economy.
Answer:
The tax cut would [ Select ]
consumption, shifting the [Select]
[ Select ]
.As a result.
curve
the output
[ Select ]
Given the interest rate, investment ( Select ]
The economy would get out of the recession.
c. Suppose that the government was running a large budget deficit, constraining the use of an expansionary fiscal policy. In fact, the government had to implement a
contractionary fiscal policy to reduce the deficit. However, the Fed was able to use its expansionary monetary policy. The interest rate was cut. Describe graphically
the effects of this policy mix on the economy.
Answer:
The fiscal contraction would shift [ Select ]
The monetary expansion would shift [ Select ]
. As a result, the
interest rate [ Select ]
v while output and investment ( Select]
. If output [ Select ]
investment would [ Select ]
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education