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.15.0Money Supply12.5Money Demand0-10.0Money Supply7.55.02.50INTEREST RATE015Money Demand30456075MONEY (Billions of dollars)a90L21 Consider a hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the remaining $0.50. The followinggraph shows the economy's initial aggregate demand curve (AD₁).Suppose the government increases its purchases by $5 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.?116RICE LEVEL114112110108AD₁AD₂AD 3CF9F10F11F12FnLock

Answer - Monetary Policies :- These are the policies which is used by the Central Banks of…

now the impact of the increase in government purchases on the interest rate by shifting one or both of the curves on the following graph. 15.0 Money Supply 12.5 Money Demand 1 10.0 Money Supply 7.5 INTEREST RATE 5.0 2.5 0 0 15 Money Demand 30 45 60 75 MONEY (Billions of dollars) 90

now the impact of the increase in government purchases on the interest rate by shifting one or both of the curves on the following graph. 15.0 Money Supply 12.5 Money Demand 1 10.0 Money Supply 7.5 INTEREST RATE 5.0 2.5 0 0 15 Money Demand 30 45 60 75 MONEY (Billions of dollars) 90

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Homework (Ch 21) 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 (AD₁). Suppose the government increases its purchases by $3 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. PRICE LEVEL 116 114 112 110 108 106 104 102 100 100 AD1 102 112 104 106 108 110 OUTPUT (Billions of dollars) 114 116 AD₂ AD 3
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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. INTEREST RATE 12 10 8 2 0 0 20 Money Supply known as the Money Demand 40 60 80 MONEY (Billions of dollars) 100 120 = Money Demand Money Supply ? Suppose that for every increase in the interest rate of one percentage point, the level of investment spending declines by $0.5 billion. Based on the changes made to the money market in the previous scenario, the new interest rate causes the level of investment spending to by Taking the multiplier effect into account, the change in investment spending will cause the quantity of output demanded to by at every price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is effect. Use the purple 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…
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