The /S equation is determined to be Y= 1506.77-2869.23/.The LM equation is given as i = 0.05Initial equilibrium values of Y, C, I, and the real money supply are calculated asY = 1,363C = 723/ = 309MIP = 2,488Now suppose that the central bank hikes the interest rate to 6%. In a graph of the IS-LM model, this causes the LM curve to shiftFollowing the change in the interest rate to 6%, the value of equilibrium real output becomesFollowing the change in the interest rate to 6%, the values of the new equilibrium C and / are:C =(Round your responses to the nearest integer.)1 =(Round your responses to the nearest integer.)Which of the following statements is not consistent with the effects of a contractionary monetary policy?As the interest rate rises,O A. the money supply decreases and equilibrium real output decreases.O B. equilibrium consumption decreases.O C. equilibrium investment may increase, decrease, or remain unchanged.O D. the real demand for money falls.(Round your response to the nearest integer.) Consider the following /S-LM model:C = 218 +0.46YD/ = 160+ 0.15Y-1,119/G = 332T ==MIP =2660.052.1Y-7,490/

IS relation depicts the set of points which represent equilibrium in goods market . IS relation : Y…

The /S equation is determined to be Y= 1506.77-2869.23i. The LM equation is given as i = 0.05 Initial equilibrium values of Y, C, I, and the real money supply are calculated as Y = 1,363 C = 723 / = 309 MIP = 2,488 Now suppose that the central bank hikes the interest rate to 6%. In a graph of the IS-LM model, this causes the LM curve to shift Following the change in the interest rate to 6%, the value of equilibrium real output becomes [ Following the change in the interest rate to 6%, the values of the new equilibrium C and / are: C= (Round your responses to the nearest integer.) | = (Round your responses to the nearest integer.) (Round your response to the nearest integer.)

The /S equation is determined to be Y= 1506.77-2869.23i. The LM equation is given as i = 0.05 Initial equilibrium values of Y, C, I, and the real money supply are calculated as Y = 1,363 C = 723 / = 309 MIP = 2,488 Now suppose that the central bank hikes the interest rate to 6%. In a graph of the IS-LM model, this causes the LM curve to shift Following the change in the interest rate to 6%, the value of equilibrium real output becomes [ Following the change in the interest rate to 6%, the values of the new equilibrium C and / are: C= (Round your responses to the nearest integer.) | = (Round your responses to the nearest integer.) (Round your response to the nearest integer.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Based on research conducted by the Department of Economic Analysis, the government and policy advisors of an economy believe that the full employment GDP is $7500 billion, and Pe, the overall expected price level is 118. In addition, the researchers estimate that the short run aggregate supply equation is Y = Ypot + 80 (P- Pe), where Ypot is the potential level of output. In 2016, the population was 400 million, and the structure of the economy was described by the following equations for household consumption behavior and taxes received: C = 100+ 0.8DI, and T = 0.25Y where all monetary values are in billions of dollars. Government spending was fixed at $1700 billion, and firm's investment behavior was fixed at $800 billion. Trading is allowed in this economy and in 2016, trading occurred such that the trade account was balanced. That is, net exports (X-IM) was equal to zero. Question 17 of 20) Now consider that in in the following year (2017), the government decided to implement a…
Consumption and the real interest rate: According to the life-cycle / permanent-income hypothesis, consumption depends on the present discounted value of income. An increase in the real interest rate will make future income worth less, thereby reducing the present discounted value and reducing consumption. To incorporate this channel into the model, suppose the consumption equation is given by Assume the remainder of the model is unchanged from the original setup, as in Table 11.1. (a) Derive the IS curve for this new specification. (b) How and why does it differ from the original IS curve?
What does the intersection of the AD and AS curves signify? Contrast the shor-turn aggregate supply (SRAS) curve from the long-run aggregate supply (LRAS) curve. (11.2)
Consider an economy described by the IS-LM model. You are given the following data: MPC = 0.6, C * = 10 AE = Y G = 75,T = 60 I(r) = 500 – 1200r M = 250, P = 5 - k(r)Y = 0.1Y – 10r (A) Write out the planned expenditure function and solve for equilibrium output as a function of the interest rate (the IS curve). (B) Using the money demand function, solve for equilibrium output given the interest rate in the money market (the LM curve). (C) Using the IS and LM curves, derive equilibrium output and the interest rate.
Why does interest rate links the two halves of the IS-LM model together?
5. Using the accelerator model in which the level of inventories in current period depends on the expected sales following this equation: Nt= a ESt Where N stands for the current level of inventories, ESt stands for the level of expected sales and alpha is a parameter equal to 0.6. The growth or increase in inventories is given by AN, = B(N₁-N₁-1), where Beta parameter is equal to 0.3 a) Suppose that the initial level of inventories is zero and the forecasting for sales for this period is equal to 200. Can you quantify the level of inventory investment? What would it be total production in period 1? b) Now suppose that in the second period there growth of inventories is 12%. What is the value of inventory investment for period 2 and forecasting sales for period 2?
Use an ISLM model to analyze the effects of a money supply increase on the interest rate and GDP, when the IS curve is quite steep and the LM curve is quite flat
Consider the following macroeconomy. All amounts are in millions (m.) of $: C = 750 + 0.8 YD I = 1200 G = 150 T = 250 Calculate eqm Y and prove that I=sum of S at this equilibrium. What is meant by the “Paradox of Thrift” (POT)? Go back to the original eqm of part a. Now prove using multiplier analysis that the POT holds in this economy by assuming that the change in co is -$50 m. As part of your answer, explain “intuitively” why this paradox exists. Show what happens in the Z-Y space graph.
True or False: An increase in the price level will shift the LM curve to the right.
Question 4: Stability of the IS-LM model Consider the following short-run dynamics in the closed-economy IS-LM model. It is assumed that the price level is fixed and (for convenience) has been normalized to unity (P = 1): Ř = ¢r [(Y, R) – M], Ý = 2 C(Y – T) + I(R) + G – Y, 2 >0, P1 > 0, where Y is output, R is the interest rate, M is the money stock, C is consumption, T is taxes, I is investment, and G is government consumption. As usual, a dot above a variables denotes that variable's time rate of change, i.e. Ř = dR/dt and Ý = dY/dt. (a) Interpret these equations. (b) Can you say something about the relative speeds of adjustment in the goods and financial markets?
I need a question 2 solution... I attach question 1 for LM and IS equation ....................... i repeat again question 2 solution
Assume that the long-run level of output is Y = 1000, which the economy is also at initially in the short-run. Suppose that the consumption and investment functions are, respectivley, C = 100 + 0.8(Y – T), I = 100 – 2000r, that is, MPC is 0.8. Furthermore, the LM (money market equilibrium) curve is M Y 200 The government is currently implementing a policy = 80, Ť = 50, and the central bank (CB) is supplying M = 1000. Expected inflation is = 0. Continuing from Part 1, due to the uncertainty surrounding the coronavirus, consumers tighten their belts and consumption function changes to C = 40 + 0.8(Y – Ť). Focus only on the economy's short-run responses, that is, when the price level P cannot adjust. Now suppose the government does nothing, and the CB wants to stabilise the economy with a constant r-target policy. a) The CB must react by • money supply, to b) Due to the CB's monetary policy, the LM curve c) Output, Y, changes to d) Consumtpion, C, changes to e) Private investment, I,…