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If the Fed lowers the discount rate i) What happens in the L-M diagram (liquidity preference)?...
1) The Fed does easy money policy. As a result, the a. interest rate rises and...
1) The Fed does easy money policy. As a result, the a. interest rate rises and the LM curve shifts left b. interest rate falls and the LM curve shifts left c. interest rate rises and the LM curve shifts right d. interest rate falls and the LM curve shifts right
OY 10. By referring to Figure 7-1, an increase in the money stock a shifts the...
OY 10. By referring to Figure 7-1, an increase in the money stock a shifts the LM schedule to the right from LMoto LM b shifts the LM schedule to the left from LMo to LM e leaves the LM curve unchanged at LM. d. shifts neither the IS nor the LM schedule. 11. Changes in all of the following shift the LM curve except a. the price level. b. income. c. the money supply. d. money demand. e. all...
Assume the Chilean economy can be described as follows: C=200+0.25Yd l=150+0.25Y-1000r G=250 T=200 (M/P)d= L(r, Y)...
Assume the Chilean economy can be described as follows: C=200+0.25Yd l=150+0.25Y-1000r G=250 T=200 (M/P)d= L(r, Y) = 2Y- 8000r Ms=1840 P=1 a) Derive the equation for the LM curve. ( 1 .5 mk) b) Determine the slope af the LM curve. (0.5 mark) c) Derive the equation for the IS curve (I.S mk) d) Determine the slope ofthe IS curve. (0.5 mk) c) Compute the quilibrium values of income (Y) and interest rate (R)? (2 marks) [) Calculate the value...
Consider the impact of a decrease in effective tax rate on capital. The shock is most...
Consider the impact of a decrease in effective tax rate on capital. The shock is most likely to affect the A. FE line. B. LM curve. C. IS curve. D. AS curve. In the short run, before general equilibrium is restored, the IS curve shifts _____ and causes _____. A. up and to the right; no change in the real interest rate or the price level B. up and to the right; the real interest rate to rise and the...
The Moulton Plane is the plane M = (R2, LM) such that a subset I of...
The Moulton Plane is the plane M = (R2, LM) such that a subset I of R2 belongs to LM if and only if one of the following holds: i) l = {(x,y)| x=a} (vertical line); ii) l = {(x,y)| y=b} (horizontal line) iii) ( = {(x,y)| y = mx +b where m<0} (line with negative slope) [ m(x - x0) if x xo when m>0}. (bent line W 14,9 m ( x - x0) if x > xo with...
3. (20 points) Totally differentiate the following IS-LM model and show what happens to the equilibrium...
3. (20 points) Totally differentiate the following IS-LM model and show what happens to the equilibrium interest rate (*) when the money supply increases, and all other things remain the same. Y = C(Y) + I(i) +G M° = KY +L(i) where total income (Y) and interest rates (i) are endogenous. In this case, I(i) is investment and it decreases when interest rates go up. Let Li) be the demand for 1 cash, which goes down when interest rates go...
Liquidity Trap in the IS-LM Model (50 points) Consider a closed economy in which output is...
Liquidity Trap in the IS-LM Model (50 points) Consider a closed economy in which output is the sum of consumption, investment and government purchases Y = C + I + G, and where C, I and G are respectively given by C = 5000 – 2000 r + 0.8(Y– T), I = 1500 – 3000 r, and G = 2500. Note also that lump-sum taxes T are given by 1250. (a) (5 points) Recalling that national savings equals S =...
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...
1. If demand deceases and supply remains constant, what happens to the market equilibrium? A. Quantity...
1. If demand deceases and supply remains constant, what happens to the market equilibrium? A. Quantity and price both rise. B. neither price or quantity will change C. Quantity and price both fall. D. Quantity rises and price falls. 2. A positive statement is A. an opinion B. a value judgement. C. can be shown to be correct or incorrect. D. based upon what can be demonstrated to be true. 3. If a technology change reduces a company's production costs,...
IS. Which of the following best describes what happens when the price of oranges increases? a)...
IS. Which of the following best describes what happens when the price of oranges increases? a) There is a shift to the right in the demand curve for oranges b) There is a shift to the left of the demand curve for oranges c) There is a shift along the demand curve for oranges d) There is a no change in the demand curve for oranges 16. Which of the following best describes what happens when consumer income increases? a)...
OY 10. By referring to Figure 7-1, an increase in the money stock a shifts the LM schedule to the right from LMoto LM b shifts the LM schedule to the left from LMo to LM e leaves the LM curve unchanged at LM. d. shifts neither the IS nor the LM schedule. 11. Changes in all of the following shift the LM curve except a. the price level. b. income. c. the money supply. d. money demand. e. all...
The Moulton Plane is the plane M = (R2, LM) such that a subset I of R2 belongs to LM if and only if one of the following holds: i) l = {(x,y)| x=a} (vertical line); ii) l = {(x,y)| y=b} (horizontal line) iii) ( = {(x,y)| y = mx +b where m<0} (line with negative slope) [ m(x - x0) if x xo when m>0}. (bent line W 14,9 m ( x - x0) if x > xo with...
3. (20 points) Totally differentiate the following IS-LM model and show what happens to the equilibrium interest rate (*) when the money supply increases, and all other things remain the same. Y = C(Y) + I(i) +G M° = KY +L(i) where total income (Y) and interest rates (i) are endogenous. In this case, I(i) is investment and it decreases when interest rates go up. Let Li) be the demand for 1 cash, which goes down when interest rates go...
IS. Which of the following best describes what happens when the price of oranges increases? a) There is a shift to the right in the demand curve for oranges b) There is a shift to the left of the demand curve for oranges c) There is a shift along the demand curve for oranges d) There is a no change in the demand curve for oranges 16. Which of the following best describes what happens when consumer income increases? a)...
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