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
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Q: Assume the following IS-LM model: Expenditure sector: Money sector: C = 100 + (4/5)YD I = 300 - 20i…
A: Given C = 100+(4/5) YD G = 120 I-= 300-20i TA= (1/4) Y NX = -20 M = 700 P = 2 Md = (1/3) Y+200-10i
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Q: What are some examples of changes in the economy that would lead to a movement along the IS curve?…
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Q: QUESTION 12 Which of the following is not an assumption of the IS/LM model? Short-run model…
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Q: Assume the following IS-LM model: expenditure sector:…
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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
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- Assume the following model of the economy C = 60 +0.75(Y – T) I = 45 – 5r G = 40 and T = 40 MS 110 P = 1 (fixed) (M/P)D = 0.5Y – 5r, - where C=consumption spending, Y=income, |=investment spending, r=the interest rate, G=government spending, T=taxes. MS=the money supply, P=the price level, and (M/P)D is real money demand. (a) Write the equations for the IS and LM curves and sketch these functions. Solve for the equilibrium values of Y and r and include these values in the graph.answer c and d Suppose that the following system of equations describe the macroeconomy of a hypothetical country: Y= C(y)+I(i)+G : IS or goods market M/p=L(i,y) : LM or money market b) Taking money supply and government expenditure as exogenous and the price level as fixed, determine and provide economic intuition for the signs and magnitudes of the following multipliers dY/dG and di/dG c) For a simultaneous increase in both the interest elasticity of investment and interest elasticity demand for money parameters, determine the net effect on the values of the multipliers in part b). d) For a horizontal LM curve, determine the numerical values of your answers in part b) above if: Marginal propensity to consume=5/6 Tax rate=0.25 Interest elasticity of investment=5 Interest elasticity of demand for money=50 Income elasticity of demand for money=2 answer c and d onlyAssume the following IS-LM model: expenditure sector: money sector: AD = C + I + G + NX I = 300 - 20i M = 700 C = 100 + (4/5)YD G = 120 P = 2 YD = Y - TA NX = -20 md = (1/3)Y + 200 - 10i TA = (1/4)Y By how much will the equilibrium level of income (Y) and the interest rate (i) change, if the Fed responds to an increase in government purchases of 160 by increasing nominal money supply to M' = 1,100?
- Assume the following IS-LM model: expenditure sector: money sector: AD = C + I + G + NX I = 300 - 20i M = 700 C = 100 + (4/5)YD G = 120 P = 2 YD = Y - TA NX = -20 md = (1/3)Y + 200 - 10i TA = (1/4)Y a. Derive the equilibrium values of consumption (C) and money demand (md). b. How much investment (I) will be crowded out if the government increases its purchases by DG = 160 and nominal money supply (M) remains unchanged? c. By how much will the equilibrium level of income (Y) and the interest rate (i) change, if the Fed responds to this increase in government purchases by increasing nominal money supply to M' = 1,100?I need help soon as possible I have hour and half to finish please.QUESTION 12 Which of the following is not an assumption of the IS/LM model? Short-run model Interaction between money and goods market There are unemployed resources Prices are sticky Demand is passive
- What are some examples of changes in the economy that would lead to a movement along the IS curve? What are some changes that would shift the IS curve?q8Use the IS-LM model to answer this question. Suppose there is a simultaneous increase in taxes and reduction in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix will have on investment? Explain.
- Which of the following is not an assumption of the IS/LM model? Short-run model Interaction between money and goods market There are unemployed resources Prices are sticky Demand is passiveConcerning the Great Depression; the stock market crash of 1929, collapse of the banking system, and collapse of the money supply all were factors that could be modeled as a leftward shift of SRAS a rightward shift of SRAS a leftward shift of AD a rightward shift of ADAssume the following IS-LM model:Expenditure sector: Money sector:C = 100 + (4/5)YD I = 300 - 20i M = 700G = 120 TA = (1/4)Y P = 2 YD = Y - TA NX = -20 Md = (1/3)Y + 200 - 10i a) Derive the IS and LM equations for the above model.b) Draw the IS and LM curves. What are the equilibrium values of output (Y) and interest rate(i)? Show these values on the graph you drew. Derive the equilibrium values of consumption (C) and money demand (Md).c) How much investment (I) will be crowded out if the government increases its purchases by ΔG = 160 and nominal money supply (M) remains unchanged? Show how this increase in government purchases would affect the graph in part (b) by drawing a new graph.
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