issume that the long-run level of output is Y = 1000, which the economy is also at initially in the short-run. Suppose that the cons und investment functions are, respectivley, C = 100 + 0.8(Y – Ť), I=100 – 2000r, hat is, MPC is 0.8. Furthermore, the LM (money market equilibrium) curve is "he government is currently implementing a policy - 80, und the central bank (CB) is supplying M == 1000. xpected inflation is = 0. Ť = 50, Continuing from Part 1, due to the uncertainty surrounding the coronavirus, consumers tighten their belts and consumption changes to - 40 + 0.8(Y – Ť). Focus only on the economy's short-run responses, that is, when the price level P cannot adjust. Nothing else changes. Then a) In the Keynesian cross diagram, planned expenditures, PE, b) The IS curve c) The LM curve

issume that the long-run level of output is Y = 1000, which the economy is also at initially in the short-run. Suppose that the cons und investment functions are, respectivley, C = 100 + 0.8(Y – Ť), I=100 – 2000r, hat is, MPC is 0.8. Furthermore, the LM (money market equilibrium) curve is "he government is currently implementing a policy - 80, und the central bank (CB) is supplying M == 1000. xpected inflation is = 0. Ť = 50, Continuing from Part 1, due to the uncertainty surrounding the coronavirus, consumers tighten their belts and consumption changes to - 40 + 0.8(Y – Ť). Focus only on the economy's short-run responses, that is, when the price level P cannot adjust. Nothing else changes. Then a) In the Keynesian cross diagram, planned expenditures, PE, b) The IS curve c) The LM curve

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume that the one-year interest rate is on the vertical axis of the IS-LM model and that the yield curve is initially upward sloping. Suppose that financial market participants expect that the central bank will conduct an open market purchase of bonds in the future. Given this information, we would expect which of the following to occur? OA The yield curve will become downward sloping. B. There will be no change in the slope of the yield curve. C. The yield curve will become flatter. The yield curve will become steeper. OD. The yield curve will become vertical. OE.
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Let the IS equation be A 9 -b 1-b Y = where 1-b is the marginal propensity to save, g is the investment sensitivity to inter- est rates, and A is an aggregate of exogenous variables. Let the LM equation be Mo 1 k 1- + i k where k and I are income and interest sensitivity of money demand, respectively, and Mo is real money balances. If b=0.7, g=100, A = 252, k = 0.25, = 200, and M = 176, then (a) Write the IS-LM system in matrix form.
Which of the following statements is true for the scenario illustrated in the below diagram? LRAS Price Level (base year = 100) 120 110 100 90 80 400 SRAS E₁ 700 Eo AD AD₁ 500 600 Real Output (constant dollars) 800 O it illustrates a recessionary gap at Eo Oit illustrates expansionary monetary policy by shifting ADO to AD1 O it illustrates procyclical monetary policy O it can be caused by a tightening of the money supply, also known as contractionary monetary policy
The AS curve shifts to the left when O All listed options are correct. the cost of production rises the government does expansionary fiscal policy O net exports rises O we lower interest rates
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. Assume that the monetary policy curve is given byr = 1.5 + 0.75p.a. Calculate the real interest rate when the inflation rateis 2%, 3%, and 4%.b. Draw a graph of the MP curve, labeling the pointsfrom part (a).c. Assume now that the monetary policy curve is givenby r = 2.5 + 0.75p. Does the new monetary policycurve represent an autonomous tightening or loosening of monetary policy?d. Calculate the real interest rate when the inflation rateis 2%, 3%, and 4%, and draw the new MP curve,showing the shift from part (b).
a. If money supply is increased by 10, what will be the new interest rate? Round your answers to one decimal place. Pabst: 5 Numeric ResponseEdit Unavailable. 5 correct.% Kokanee: 6 Numeric ResponseEdit Unavailable. 6 correct.% b. What will be the increase in investment spending as a result of this new interest rate? Pabst: 60 Numeric ResponseEdit Unavailable. 60 incorrect. Kokanee: 50 Numeric ResponseEdit Unavailable. 50 incorrect. c. If the multiplier is 3 in each economy, what will be the increase in GDP? Pabst: Kokanee: d. In which economy would monetary policy be more effective in closing a recessionary gap? Pabst Can you please help with B, C
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Please pleaseee do this Question : For this question assume that the real money demand function is L(R, Y) = kY - hR where k > 0 represents the sensitivity of the money demand to income and h > 0 represents the sensitivity of the money demand to the interest rate. Suppose that these sensitivity parameters are not known for the economy of Macroland and there are two possibilities: it is either i) high k and low h, or ii) low k and high h. To understand which one of these two scenarios is correct you analyze a given policy change: an increase in the overall level of taxes. Using the AA-DD model, compare and contrast the short run effects of this policy change in Macroland under these two scenarios. Explain your results intuitively.
In the AS/AD Model, a decrease in the financial friction will Select one: O a. Shift the aggregate demand curve to the right. Ob. O b. Shift the aggregate supply curve to the left. Shift the aggregate supply curve to the right. O c. O d. Shift the aggregate demand curve to the left.