The change in the factor that causes the increase in the income.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 13, Problem 1QQ

To determine

The change in the factor that causes the increase in the income.

Expert Solution & Answer

Answer to Problem 1QQ

Option 'a' is correct.

Explanation of Solution

The IS LM framework of the economy deals with the closed economy. It does not consider the international trade and balance of payments into consideration. This leads to the generation of the new model that incorporated the balance of payment into the calculations known as the Mundell Fleming model.

Option (a):

When the exchange rate is floating under the Mundell Fleming model, the increase in the money supply reduces the rate of interest in the economy. The lower interest rate increases the investment expenditure and as a result, more employment will be generated in the economy leading to higher level of income in the economy. Thus, increase in the money supply increases the income level in the economy. Therefore, option 'a' is correct.

Option (b):

When there is a decrease in the money supply in the economy, it would reduce the money in circulation. As a result, the interest rate in the economy would increase. The higher the interest rate, the higher will be the investment from abroad. The higher demand for the domestic currency would further increase the rate of interest and this decreases the investment level as well as the income in the economy. Thus, option 'b' is incorrect.

Option (c):

The higher taxes decreases the disposable income of the people. The lower the disposable income is, the lower would be the savings rate in the economy. Since the changes in the tax rates are part of the fiscal policy of the government, there will be no impact on the aggregate income level of the economy. Thus, option 'c' is incorrect.

Option (d):

The lower taxes increases the disposable income of the people. Under the floating exchange rate system, there will be no impact over the aggregate income of the economy due to the fiscal policy. Since the changes in the tax rates are part of the fiscal policy of the government, there will be no impact on the aggregate income level of the economy. Thus, option 'd' is incorrect.

Economics Concept Introduction

Mundell - Fleming model: The Mundell Fleming model is the extended version of the IS-LM model of the economy that incorporates the BOP into the equilibrium. Thus, it is the model that portrays the short run relationship between the nominal exchange rate of the economy, interest rate and the output.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

not use ai please

Fems A and B are duopolist producers of widgets. The cost function for producing widgets C(Q)-Q² The market demand function for widgets i Q-192P Qmeasures thousands of widgets per year, Competition in the widget market is described by the Coumot model Instructions: Round your answers to 2 decimal places a What are the firms' Nanh equbrium output? b. What is the resulting price? c. What do they each emp How does the price compare to marginal cost? Price is ck to marginal cost How do the price and the two fems' joint profit compare to the monopoly price and prof Compared to the monopoly price, the Cournot price is to sed. Compared to the monopoly profit, the joint profit of the two fems to select

Suppose the marginal social cost of television sets is $100. This is constant and equal to the average cost of television sets. The annual demand for television sets is given by the following equation: Q = 200,000-500P, where Qis the quantity sold per year and P is the price of television sets. a) If television sets are sold in a perfectly competitive market, calculate the annual number sold. Under what circumstances will the market equilibrium be efficient? b) Show the losses in well-being each year that would result from a law limiting sales of television sets to 100,000 per year. Show the effect on the price, marginal social benefit, and marginal social cost of television sets. Show the net loss in well-being that will result from a complete ban on the sales of television sets. (show with graphs.)

Answer 2

Question

Chapter 13, Problem 1QQ

To determine

The change in the factor that causes the increase in the income.

Expert Solution & Answer

Answer to Problem 1QQ

Option 'a' is correct.

Explanation of Solution

The IS LM framework of the economy deals with the closed economy. It does not consider the international trade and balance of payments into consideration. This leads to the generation of the new model that incorporated the balance of payment into the calculations known as the Mundell Fleming model.

Option (a):

When the exchange rate is floating under the Mundell Fleming model, the increase in the money supply reduces the rate of interest in the economy. The lower interest rate increases the investment expenditure and as a result, more employment will be generated in the economy leading to higher level of income in the economy. Thus, increase in the money supply increases the income level in the economy. Therefore, option 'a' is correct.

Option (b):

When there is a decrease in the money supply in the economy, it would reduce the money in circulation. As a result, the interest rate in the economy would increase. The higher the interest rate, the higher will be the investment from abroad. The higher demand for the domestic currency would further increase the rate of interest and this decreases the investment level as well as the income in the economy. Thus, option 'b' is incorrect.

Option (c):

The higher taxes decreases the disposable income of the people. The lower the disposable income is, the lower would be the savings rate in the economy. Since the changes in the tax rates are part of the fiscal policy of the government, there will be no impact on the aggregate income level of the economy. Thus, option 'c' is incorrect.

Option (d):

The lower taxes increases the disposable income of the people. Under the floating exchange rate system, there will be no impact over the aggregate income of the economy due to the fiscal policy. Since the changes in the tax rates are part of the fiscal policy of the government, there will be no impact on the aggregate income level of the economy. Thus, option 'd' is incorrect.

Economics Concept Introduction

Mundell - Fleming model: The Mundell Fleming model is the extended version of the IS-LM model of the economy that incorporates the BOP into the equilibrium. Thus, it is the model that portrays the short run relationship between the nominal exchange rate of the economy, interest rate and the output.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 13, Problem 1QQ

To determine

The change in the factor that causes the increase in the income.

Expert Solution & Answer

Answer to Problem 1QQ

Option 'a' is correct.

Explanation of Solution

The IS LM framework of the economy deals with the closed economy. It does not consider the international trade and balance of payments into consideration. This leads to the generation of the new model that incorporated the balance of payment into the calculations known as the Mundell Fleming model.

Option (a):

When the exchange rate is floating under the Mundell Fleming model, the increase in the money supply reduces the rate of interest in the economy. The lower interest rate increases the investment expenditure and as a result, more employment will be generated in the economy leading to higher level of income in the economy. Thus, increase in the money supply increases the income level in the economy. Therefore, option 'a' is correct.

Option (b):

When there is a decrease in the money supply in the economy, it would reduce the money in circulation. As a result, the interest rate in the economy would increase. The higher the interest rate, the higher will be the investment from abroad. The higher demand for the domestic currency would further increase the rate of interest and this decreases the investment level as well as the income in the economy. Thus, option 'b' is incorrect.

Option (c):

The higher taxes decreases the disposable income of the people. The lower the disposable income is, the lower would be the savings rate in the economy. Since the changes in the tax rates are part of the fiscal policy of the government, there will be no impact on the aggregate income level of the economy. Thus, option 'c' is incorrect.

Option (d):

The lower taxes increases the disposable income of the people. Under the floating exchange rate system, there will be no impact over the aggregate income of the economy due to the fiscal policy. Since the changes in the tax rates are part of the fiscal policy of the government, there will be no impact on the aggregate income level of the economy. Thus, option 'd' is incorrect.

Economics Concept Introduction

Mundell - Fleming model: The Mundell Fleming model is the extended version of the IS-LM model of the economy that incorporates the BOP into the equilibrium. Thus, it is the model that portrays the short run relationship between the nominal exchange rate of the economy, interest rate and the output.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 13, Problem 1QQ

To determine

The change in the factor that causes the increase in the income.

Expert Solution & Answer

Answer to Problem 1QQ

Option 'a' is correct.

Explanation of Solution

The IS LM framework of the economy deals with the closed economy. It does not consider the international trade and balance of payments into consideration. This leads to the generation of the new model that incorporated the balance of payment into the calculations known as the Mundell Fleming model.

Option (a):

When the exchange rate is floating under the Mundell Fleming model, the increase in the money supply reduces the rate of interest in the economy. The lower interest rate increases the investment expenditure and as a result, more employment will be generated in the economy leading to higher level of income in the economy. Thus, increase in the money supply increases the income level in the economy. Therefore, option 'a' is correct.

Option (b):

When there is a decrease in the money supply in the economy, it would reduce the money in circulation. As a result, the interest rate in the economy would increase. The higher the interest rate, the higher will be the investment from abroad. The higher demand for the domestic currency would further increase the rate of interest and this decreases the investment level as well as the income in the economy. Thus, option 'b' is incorrect.

Option (c):

The higher taxes decreases the disposable income of the people. The lower the disposable income is, the lower would be the savings rate in the economy. Since the changes in the tax rates are part of the fiscal policy of the government, there will be no impact on the aggregate income level of the economy. Thus, option 'c' is incorrect.

Option (d):

The lower taxes increases the disposable income of the people. Under the floating exchange rate system, there will be no impact over the aggregate income of the economy due to the fiscal policy. Since the changes in the tax rates are part of the fiscal policy of the government, there will be no impact on the aggregate income level of the economy. Thus, option 'd' is incorrect.

Economics Concept Introduction

Mundell - Fleming model: The Mundell Fleming model is the extended version of the IS-LM model of the economy that incorporates the BOP into the equilibrium. Thus, it is the model that portrays the short run relationship between the nominal exchange rate of the economy, interest rate and the output.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 13, Problem 1QQ

To determine

The change in the factor that causes the increase in the income.

Expert Solution & Answer

Answer to Problem 1QQ

Option 'a' is correct.

Explanation of Solution

The IS LM framework of the economy deals with the closed economy. It does not consider the international trade and balance of payments into consideration. This leads to the generation of the new model that incorporated the balance of payment into the calculations known as the Mundell Fleming model.

Option (a):

When the exchange rate is floating under the Mundell Fleming model, the increase in the money supply reduces the rate of interest in the economy. The lower interest rate increases the investment expenditure and as a result, more employment will be generated in the economy leading to higher level of income in the economy. Thus, increase in the money supply increases the income level in the economy. Therefore, option 'a' is correct.

Option (b):

When there is a decrease in the money supply in the economy, it would reduce the money in circulation. As a result, the interest rate in the economy would increase. The higher the interest rate, the higher will be the investment from abroad. The higher demand for the domestic currency would further increase the rate of interest and this decreases the investment level as well as the income in the economy. Thus, option 'b' is incorrect.

Option (c):

The higher taxes decreases the disposable income of the people. The lower the disposable income is, the lower would be the savings rate in the economy. Since the changes in the tax rates are part of the fiscal policy of the government, there will be no impact on the aggregate income level of the economy. Thus, option 'c' is incorrect.

Option (d):

The lower taxes increases the disposable income of the people. Under the floating exchange rate system, there will be no impact over the aggregate income of the economy due to the fiscal policy. Since the changes in the tax rates are part of the fiscal policy of the government, there will be no impact on the aggregate income level of the economy. Thus, option 'd' is incorrect.

Economics Concept Introduction

Mundell - Fleming model: The Mundell Fleming model is the extended version of the IS-LM model of the economy that incorporates the BOP into the equilibrium. Thus, it is the model that portrays the short run relationship between the nominal exchange rate of the economy, interest rate and the output.

Answer 6

Chapter 13, Problem 1QQ

To determine

The change in the factor that causes the increase in the income.

Expert Solution & Answer

Answer to Problem 1QQ

Option 'a' is correct.

Explanation of Solution

The IS LM framework of the economy deals with the closed economy. It does not consider the international trade and balance of payments into consideration. This leads to the generation of the new model that incorporated the balance of payment into the calculations known as the Mundell Fleming model.

Option (a):

When the exchange rate is floating under the Mundell Fleming model, the increase in the money supply reduces the rate of interest in the economy. The lower interest rate increases the investment expenditure and as a result, more employment will be generated in the economy leading to higher level of income in the economy. Thus, increase in the money supply increases the income level in the economy. Therefore, option 'a' is correct.

Option (b):

When there is a decrease in the money supply in the economy, it would reduce the money in circulation. As a result, the interest rate in the economy would increase. The higher the interest rate, the higher will be the investment from abroad. The higher demand for the domestic currency would further increase the rate of interest and this decreases the investment level as well as the income in the economy. Thus, option 'b' is incorrect.

Option (c):

The higher taxes decreases the disposable income of the people. The lower the disposable income is, the lower would be the savings rate in the economy. Since the changes in the tax rates are part of the fiscal policy of the government, there will be no impact on the aggregate income level of the economy. Thus, option 'c' is incorrect.

Option (d):

The lower taxes increases the disposable income of the people. Under the floating exchange rate system, there will be no impact over the aggregate income of the economy due to the fiscal policy. Since the changes in the tax rates are part of the fiscal policy of the government, there will be no impact on the aggregate income level of the economy. Thus, option 'd' is incorrect.

Economics Concept Introduction

Mundell - Fleming model: The Mundell Fleming model is the extended version of the IS-LM model of the economy that incorporates the BOP into the equilibrium. Thus, it is the model that portrays the short run relationship between the nominal exchange rate of the economy, interest rate and the output.

Answer 7

Chapter 13, Problem 1QQ

To determine

The change in the factor that causes the increase in the income.

Answer 8

Expert Solution & Answer

Answer to Problem 1QQ

Option 'a' is correct.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

The IS LM framework of the economy deals with the closed economy. It does not consider the international trade and balance of payments into consideration. This leads to the generation of the new model that incorporated the balance of payment into the calculations known as the Mundell Fleming model.

Option (a):

When the exchange rate is floating under the Mundell Fleming model, the increase in the money supply reduces the rate of interest in the economy. The lower interest rate increases the investment expenditure and as a result, more employment will be generated in the economy leading to higher level of income in the economy. Thus, increase in the money supply increases the income level in the economy. Therefore, option 'a' is correct.

Option (b):

When there is a decrease in the money supply in the economy, it would reduce the money in circulation. As a result, the interest rate in the economy would increase. The higher the interest rate, the higher will be the investment from abroad. The higher demand for the domestic currency would further increase the rate of interest and this decreases the investment level as well as the income in the economy. Thus, option 'b' is incorrect.

Option (c):

The higher taxes decreases the disposable income of the people. The lower the disposable income is, the lower would be the savings rate in the economy. Since the changes in the tax rates are part of the fiscal policy of the government, there will be no impact on the aggregate income level of the economy. Thus, option 'c' is incorrect.

Option (d):

The lower taxes increases the disposable income of the people. Under the floating exchange rate system, there will be no impact over the aggregate income of the economy due to the fiscal policy. Since the changes in the tax rates are part of the fiscal policy of the government, there will be no impact on the aggregate income level of the economy. Thus, option 'd' is incorrect.

Answer 12

Economics Concept Introduction

Mundell - Fleming model: The Mundell Fleming model is the extended version of the IS-LM model of the economy that incorporates the BOP into the equilibrium. Thus, it is the model that portrays the short run relationship between the nominal exchange rate of the economy, interest rate and the output.

Answer 13

Ch. 13 - Prob. 1QQ Ch. 13 - Prob. 2QQ Ch. 13 - Prob. 3QQ Ch. 13 - Prob. 4QQ Ch. 13 - Prob. 5QQ Ch. 13 - Prob. 6QQ Ch. 13 - Prob. 1QR Ch. 13 - Prob. 2QR Ch. 13 - Prob. 3QR Ch. 13 - Prob. 4QR

The change in the factor that causes the increase in the income.

The change in the factor that causes the increase in the income.

Answer to Problem 1QQ

Explanation of Solution

Want to see more full solutions like this?

Chapter 13 Solutions