Homework Answers
Option B. With the increase in MPC, then a change in investment demand causes a big increase in national income and product and hence the slope of the IS curve reduces to become flat
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In the context of the IS/LM model, with the interest rate on the vertical axis, an...
Consider the following IS-LM model. Starting from an equilibrium at interest rate rz and income Y2,...
Consider the following IS-LM model. Starting from an equilibrium at interest rate rz and income Y2, if there is an increase in government spending that shifts the IS curve to IS2, then in order to keep the interest rate constant: LM Interest rate, r LM LM 12 1'3 14 IS2 IS Y Y2 Y; YA Income, output, Y Select one: a. The Federal Reserve should increase the money supply O b. Cannot determine from the available information. c. The Federal...
1. If the money demand does not depend on the interest rate, then the LM curve...
1. If the money demand does not depend on the interest rate, then the LM curve ______. a. is horizontal b. is vertical c. shifts up to the right d. shifts down to the right 2. If money demand becomes more income elastic, the LM curve will __________. a. become flatter b. shift to the right c. become stepper d. shift to the left 3. The labour force is defined as _________. a. the total number of working age individuals...
a) Explain how, i) the interest sensitivity of private spending and ii) marginal propensity to consume, determine the s...
a) Explain how, i) the interest sensitivity of private spending and ii) marginal propensity to consume, determine the slope of an iS curve. b) Suppose the Reserve Bank of Australia (RBA) is concemed about recession and wants to adopt an expansionary monetary policy. Explain, using the IS-LM diagram(s), how the effectiveness of monetary policy in increasing the output level may depend on the interest sensitivity of investment spending
a) Explain how, i) the interest sensitivity of private spending and ii)...
If money demand does not depend on the interest rate, then the LM curve is ______...
If money demand does not depend on the interest rate, then the LM curve is ______ and ______ policy has no effect on output. A. horizontal; monetary B. vertical; monetary C. horizontal; fiscal D. vertical; fiscal
- Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against...
- Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the...
Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the...
Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate (on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the demand...
t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted...
t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than...
need help on d-i The IS-LM view of the world with more complex financial markets Consider...
need help on d-i
The IS-LM view of the world with more complex financial markets Consider an economy described by Figure 6-6 in the text. a. What are the units on the vertical axis of Figure 6-6? b. If the nominal policy interest rate is 5% and the expected rate of inflation is 3%, what is the value for the vertical intercept of the LM curve? c. Suppose the nominal policy interest rate is 5%. If expected inflation decreases from...
Assume the LM curve is flat. An increase in the risk premium A. the IS-curve will...
Assume the LM curve is flat. An increase in the risk premium A. the IS-curve will shift to the right and an increase in equilibrium output. B. the LM-curve will shift to the up and an increase in equilibrium interest rate. C. the LM-curve and IS-curve remain same, so no impact on equilibrium output and interest rate D. the LM-curve will shift to the down and an increase in equilibrium output. E. the IS-curve will shift to the left and...
Q: Draw the IS??LM model. Label the short run output and equilibrium interest rate a) \Animal...
Q: Draw the IS??LM model. Label the short run output and equilibrium interest rate a) \Animal spirits" was Keynes' explanation for random shifts in the IS curve due to consumers' desire for consumption goods. An increase in consump- tion shifts the IS curve to the right. What happens to short run output and the equilibrium interest rate after this shift? What actions could the Federal reserve take to keep the interest rate xed at its original level?
Consider the following IS-LM model. Starting from an equilibrium at interest rate rz and income Y2, if there is an increase in government spending that shifts the IS curve to IS2, then in order to keep the interest rate constant: LM Interest rate, r LM LM 12 1'3 14 IS2 IS Y Y2 Y; YA Income, output, Y Select one: a. The Federal Reserve should increase the money supply O b. Cannot determine from the available information. c. The Federal...
a) Explain how, i) the interest sensitivity of private spending and ii) marginal propensity to consume, determine the slope of an iS curve. b) Suppose the Reserve Bank of Australia (RBA) is concemed about recession and wants to adopt an expansionary monetary policy. Explain, using the IS-LM diagram(s), how the effectiveness of monetary policy in increasing the output level may depend on the interest sensitivity of investment spending
a) Explain how, i) the interest sensitivity of private spending and ii)...
- Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the...
Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate (on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the demand...
t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than...
need help on d-i
The IS-LM view of the world with more complex financial markets Consider an economy described by Figure 6-6 in the text. a. What are the units on the vertical axis of Figure 6-6? b. If the nominal policy interest rate is 5% and the expected rate of inflation is 3%, what is the value for the vertical intercept of the LM curve? c. Suppose the nominal policy interest rate is 5%. If expected inflation decreases from...
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