Economicsexplain both figures individually and under seperate heading. mention what is happeninh in both the graphs and why there is shift in the curves. how the curves effect the variables mentioned in x and y axis. give a detailed explaination and step wise. FIG 38.7-moneystock vs interestrate control with a volatile IS curveIf the IS curveexhibits instability,pegging the moneystock will lead tosmaller fluctuationsin AD than willpegging the interestrateFIG 39.6-MACRO POLICIESTO CORRECT ADISEQUILIBRIUMMonetaryandfiscal policy canhelp the economyrecover from anegative demandshock, so long astheyappropriatelyaretimed.Interest rateInterest ratPrice levelY3 Y₁(1) IS/LMY₂ Y₁Real national income(ii) AS/ADY₂ Y, Y*National incomeLRASIS,Y, Y*National incomeLMLM,ISSRASADAD₁LMO152BB

IS-LM Model- it is a model that studies the relationship between interest rate and real income. IS…

Answered: FIG 38.7-money stock vs interest rate…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Economics

explain both figures individually and under seperate heading. mention what is happeninh in both the graphs and why there is shift in the curves. how the curves effect the variables mentioned in x and y axis. give a detailed explaination and step wise.

FIG 38.7-money
stock vs interest
rate control with a volatile IS curve
If the IS curve
exhibits instability,
pegging the money
stock will lead to
smaller fluctuations
in AD than will
pegging the interest
rate
FIG 39.6-
MACRO POLICIES
TO CORRECT A
DISEQUILIBRIUM
Monetary
and
fiscal policy can
help the economy
recover from a
negative demand
shock, so long as
they
appropriately
are
timed.
Interest rate
Interest rat
Price level
Y3 Y₁
(1) IS/LM
Y₂ Y₁
Real national income
(ii) AS/AD
Y₂ Y, Y*
National income
LRAS
IS,
Y, Y*
National income
LM
LM,
IS
SRAS
AD
AD₁
LMO
152
BB

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