Note: Hand written solution is not accepted. 1. The Biden administration was able to pass a $1.2 Trillion Infrastructure Bill(Infrastructure Investment and Jobs Act) on November 6 of this year. As its nameimplies, the objective of the Bill is to improve and modernize the nation's aginginfrastructurea. With the help of a graph, what do you think will happen to the IS curve as thisBill begins to yield its expected results?b. If the improving and modernizing of the infrastructure were to be funded by anincrease in taxes, could this dampen the impact of the Bill? Answer this questionwith the help of IS curve2. Consider the market for real money balances. Suppose the US economy enters arecessionary period and aggregate income begins to decrease. With the help of a graph,describe the effect on the interest rate if the Fed decides to increase the money supply atthe same time that aggregate output decreases (assume the price level remains constant).3. Assume the demand for real money balances is given by --150i.Md=a. Find the equilibrium interest rate if the money supply is $1,700 billion ($1,700 billion) and output equals $12,900 billion (Y = $12,900 billion).Find the new equilibrium interest rate if the money supply is $1,700 billion andoutput increases to $13,800 billionb.c. Plot both interest rates and demand curves on the same graph

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The Biden administration was able to pass a $1.2 Trillion Infrastructure Bill (Infrastructure Investment and Jobs Act) on November 6 of this year. As its name implies, the objective of the Bill is to improve and modernize the nation's aging infrastructure a. With the help of a graph, what do you think will happen to the IS curve as this Bill begins to yield its expected results? b. If the improving and modernizing of the infrastructure were to be funded by an increase in taxes, could this dampen the impact of the Bill? Answer this question with the help of IS curve

The Biden administration was able to pass a $1.2 Trillion Infrastructure Bill (Infrastructure Investment and Jobs Act) on November 6 of this year. As its name implies, the objective of the Bill is to improve and modernize the nation's aging infrastructure a. With the help of a graph, what do you think will happen to the IS curve as this Bill begins to yield its expected results? b. If the improving and modernizing of the infrastructure were to be funded by an increase in taxes, could this dampen the impact of the Bill? Answer this question with the help of IS 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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Question

Note: Hand written solution is not accepted.

1. The Biden administration was able to pass a $1.2 Trillion Infrastructure Bill
(Infrastructure Investment and Jobs Act) on November 6 of this year. As its name
implies, the objective of the Bill is to improve and modernize the nation's aging
infrastructure
a. With the help of a graph, what do you think will happen to the IS curve as this
Bill begins to yield its expected results?
b. If the improving and modernizing of the infrastructure were to be funded by an
increase in taxes, could this dampen the impact of the Bill? Answer this question
with the help of IS curve
2. Consider the market for real money balances. Suppose the US economy enters a
recessionary period and aggregate income begins to decrease. With the help of a graph,
describe the effect on the interest rate if the Fed decides to increase the money supply at
the same time that aggregate output decreases (assume the price level remains constant).
3. Assume the demand for real money balances is given by --150i.
Md
=
a. Find the equilibrium interest rate if the money supply is $1,700 billion (
$1,700 billion) and output equals $12,900 billion (Y = $12,900 billion).
Find the new equilibrium interest rate if the money supply is $1,700 billion and
output increases to $13,800 billion
b.
c. Plot both interest rates and demand curves on the same graph

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Step 2: Explain the effect with the help of the IS-LM diagram

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Step 3: Examine the effects if the government funds the Bill through higher taxation

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