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$1 billion 15 30 45 60 75 00 MONEY (Billions of dollars) $0.25 billion hat for each one-percentage-point increase in the interest rate, the level of investment spending declines by $1 billion. The change in st rate (according to the change you made to-the money market in the previous scenario) therefore causes the level of investment by nultiplier effect is accounted for, the change in investment spending will cause the quantity of output demanded Av by t spending is known as the at each price level. The impact of an increase in government purchases on the interest rate and the level of effect. rple line (diamond symbol) on the graph at the beginning of this problem to show the aggregate demand curve (AD) after accounting for of the increase in government purchases on the interest rate and the level of investment spending. ure your final aggregate demand curve (AD3) is parallel to AD, and AD2. You can see the slopes of AD, and AD, by selecting them ph. crowding-out automatic stabilizer

$1 billion 15 30 45 60 75 00 MONEY (Billions of dollars) $0.25 billion hat for each one-percentage-point increase in the interest rate, the level of investment spending declines by $1 billion. The change in st rate (according to the change you made to-the money market in the previous scenario) therefore causes the level of investment by nultiplier effect is accounted for, the change in investment spending will cause the quantity of output demanded Av by t spending is known as the at each price level. The impact of an increase in government purchases on the interest rate and the level of effect. rple line (diamond symbol) on the graph at the beginning of this problem to show the aggregate demand curve (AD) after accounting for of the increase in government purchases on the interest rate and the level of investment spending. ure your final aggregate demand curve (AD3) is parallel to AD, and AD2. You can see the slopes of AD, and AD, by selecting them ph. crowding-out automatic stabilizer

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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Show the impact of the increase in government purchases on the interest rate by shifting one or both of the curves on the following graph. 3.0 Money Supply 2.5 Money Demand 2.0 Money Supply 1.5 1.0 Money Demand 0.5 $0.5 billion $1 billion 15 30 45 60 75 90 MONEY (Billions of dollars) $0.25 billion fall Suppose that for each one-percentage-point increase in the interest-rate, the level of investment spending declines by $1 billion. The change in the interest rate (according to the change you made to the money market in the previous scenario) therefore causes the level of investment spending to rise by increase decrease After the multiplier effect is accounted for, the change in investment spending will cause the quantity of output demanded to by at each price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is known as the effect. S0.5 bilion Use the purpie line (diamond symbol) on the graph at the beginning of this problem to show the aggregate demand curve (AD3) after accounting for the impact of the increase in government purchases on the interest rate and the level of investment spending. $1 billion S0 4 bilion Hint: Be sure your final aggregate demand curve (AD3) is parallel to AD, and AD2. You can see the slopes of AD, and AD, by selecting them on the graph. crowding-out automatic stabilizer liquidity preference INTEREST RATE
Transcribed Image Text:Show the impact of the increase in government purchases on the interest rate by shifting one or both of the curves on the following graph. 3.0 Money Supply 2.5 Money Demand 2.0 Money Supply 1.5 1.0 Money Demand 0.5 $0.5 billion $1 billion 15 30 45 60 75 90 MONEY (Billions of dollars) $0.25 billion fall Suppose that for each one-percentage-point increase in the interest-rate, the level of investment spending declines by $1 billion. The change in the interest rate (according to the change you made to the money market in the previous scenario) therefore causes the level of investment spending to rise by increase decrease After the multiplier effect is accounted for, the change in investment spending will cause the quantity of output demanded to by at each price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is known as the effect. S0.5 bilion Use the purpie line (diamond symbol) on the graph at the beginning of this problem to show the aggregate demand curve (AD3) after accounting for the impact of the increase in government purchases on the interest rate and the level of investment spending. $1 billion S0 4 bilion Hint: Be sure your final aggregate demand curve (AD3) is parallel to AD, and AD2. You can see the slopes of AD, and AD, by selecting them on the graph. crowding-out automatic stabilizer liquidity preference INTEREST RATE
7. Fiscal policy, the money market, and aggregate demand Consider a hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the remaining $0.50. The following graph shows the economy's initial aggregate demand curve (AD;). Suppose the government increases its purchases by $2 billion. Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD2) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (AD2) is parallel to AD1. You can see the slope of AD1 by selecting it on the following graph. 116 114 AD 2 112 AD 1 110 AD2 108 106 104 102 100 100 102 104 108 108 110 112 114 116 OUTPUT (Billions of dollars) The following graph shows the money market in equilibrium at an interest rate of 1.5% and a quantity of money equal to $45 billion. PRICE LEVEL
Transcribed Image Text:7. Fiscal policy, the money market, and aggregate demand Consider a hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the remaining $0.50. The following graph shows the economy's initial aggregate demand curve (AD;). Suppose the government increases its purchases by $2 billion. Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD2) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (AD2) is parallel to AD1. You can see the slope of AD1 by selecting it on the following graph. 116 114 AD 2 112 AD 1 110 AD2 108 106 104 102 100 100 102 104 108 108 110 112 114 116 OUTPUT (Billions of dollars) The following graph shows the money market in equilibrium at an interest rate of 1.5% and a quantity of money equal to $45 billion. PRICE LEVEL
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