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b) Suppose taxes are reduced to 370 (T=370) with no change in government spending. Calculate the...
1. Suppose that the MPC=.75. If the government was to increase equilibrium output by $10,000, by...
1. Suppose that the MPC=.75. If the government was to increase equilibrium output by $10,000, by how much should they increase government spending? 2. This question considers the link between the IS-LM model and the AD-AS model. Suppose the Fed increases the money supply. This causes the _________ curve to shift _______, which causes aggregate demand to shift ___________. Finally, equilibrium output _________ as a result. 3.Use the IS-LM diagram to answer the following: If the Fed increases the money...
6. An open economy is described by the following equations C = 1000 + 0.6(Y-T) I 20, 000 200r G 5...
Answer the question (c)
6. An open economy is described by the following equations C = 1000 + 0.6(Y-T) I 20, 000 200r G 5000 T = 5000 MD MS = 60.000 CA = NX = 2000-0.1Y-1000e KA = 5500+ 2(r-r") r"--10 (a) Derive the IS curve (Y as a function of r and e), LM curve (Y as a function of r) and the BP curve (r as a function of Y, e, and the capital mobility parameter z)...
Question #4: IS-LM Model: Change in Fiscal Policy (a) Suppose Congress had announced that they were...
Question
#4: IS-LM Model: Change in Fiscal Policy (a) Suppose Congress had
announced that they were going to increase government spending to G
= 400. Assume that (M/P)Sreturns to 1600. Now the set of equations
are the following: C = 200 + 0.25YDI = 150 + 0.25Y –1000i T = 200 G
= 400(M/P)S= 1600(M/P)d= 2Y –8000i Calculate the new level of
equilibrium interest rate (i) and equilibrium output (Y).(b)
Calculate the new levels of consumption (C) and investment (I)...
Consider the economy of Wiknam. The consumption function is given by C = 250+ 0.6(Y-T). a....
Consider the economy of Wiknam. The consumption function is given by C = 250+ 0.6(Y-T). a. Government purchases and taxes are both 100. In the accompanying diagram, graph the IS curve for r ranging from 0 to 8 by dragging and dropping the end points to the correct locations b. The money supply M is 2,875 and the price level Pis 5. In the accompanying diagram, graph the LM curve for r ranging from 0 to 8 by dragging and...
Suppose you are given IS: Y = 1250-50r and LM: Y = 450 + 30r ,...
Suppose you are given IS: Y = 1250-50r and LM: Y = 450 + 30r , α = 2.5 M = 700 and P-2, Md (1/3) Y + 200-10r, Initial equilibrium Y 750, r-10 and 1=0 a) Evaluate numerically only the impact of fiscal policy on the income level (Y) when government expenditure is increased by $5 billions, under the conditions when: i Seitivity of investment demand to the interest rate is 0.001 and 100 Less sensitivity of Investment to...
Suppose that the following equations govern planned spending in the US: C = 500 + 0.75(Y-T) T = 0.2Y – 800 I = 3000 – 64000r G = 3200 NX = 1000 – 10e (e =“trade weighted” real ex. rate. As always, inc...
Suppose that the following equations govern planned spending in the US: C = 500 + 0.75(Y-T) T = 0.2Y – 800 I = 3000 – 64000r G = 3200 NX = 1000 – 10e (e =“trade weighted” real ex. rate. As always, increase in e = $ appreciation) NFO = 500 – 60000(r – r FOR) r FOR = 3% a) Explain how NFO responds to an increase in the Home interest rate, and an increase r FOR, based on...
Consider the economy of Wiknam. The consumption function is given by f. With the initial values...
Consider the economy of Wiknam. The consumption function is given by f. With the initial values for monetary and fiscal policy, suppose that the price level falls from 5 to 3. What happens ? What are the new equilibrium interest rate and level of income? C = 250+ 0.6(Y-T). The investment function is The LM curve shifts to the by about 383.33. I = 100-20r. What are the new equilibrium interest rate and level of income? The money demand function...
13./The economy has GDP is Y - 160; Consumption is C = 120 - 500 r; Taxes are T = 10; and Government purchases are...
13./The economy has GDP is Y - 160; Consumption is C = 120 - 500 r; Taxes are T = 10; and Government purchases are G = 20 Investment is I = 100 - 1500 r; a. Is there a budget deficit or surplus? (circle) How much is the budget or surplus? G-T: 20-10 10 spub=-10 G>T then deficit - b. What is the supply equation? What is the demand equation? Y-C-G = 160-190-soor-20 r-c-G Supply: 20-50or -(-6) Demand: 100-1500...
(25pts) 2. Suppose the government wants to reduce its budget deficit. Using the long-run model of...
(25pts) 2. Suppose the government wants to reduce its budget deficit. Using the long-run model of the economy developed in Chapter 3, illustrate graphically the impact of the alternative fiscal policy measures indicated in parts (a) and (b) below. Be sure to label: (i) the axes, (ii) the curves, (iii) the initial equilibrium values; (iv) the direction curves shift; and (v) the final equilibrium values. (15) a) Suppose the government decides to reduce the government's budget deficit by reducing government...
Question 1. Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by...
Question 1. Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C= 200 + 2/3(Y-T). Planned investment is 300, as are government spending and taxes. (18 points) a. If Y is 1,500, what is planned spending? Should equilibrium Y be higher or lower than 1,500? (4 points) b. What is equilibrium Y? (Hint: Substitute the values of equations for planned consumption, investment, and government spending into the equation Y C+I+ G and then...
Answer the question (c)
6. An open economy is described by the following equations C = 1000 + 0.6(Y-T) I 20, 000 200r G 5000 T = 5000 MD MS = 60.000 CA = NX = 2000-0.1Y-1000e KA = 5500+ 2(r-r") r"--10 (a) Derive the IS curve (Y as a function of r and e), LM curve (Y as a function of r) and the BP curve (r as a function of Y, e, and the capital mobility parameter z)...
Question
#4: IS-LM Model: Change in Fiscal Policy (a) Suppose Congress had
announced that they were going to increase government spending to G
= 400. Assume that (M/P)Sreturns to 1600. Now the set of equations
are the following: C = 200 + 0.25YDI = 150 + 0.25Y –1000i T = 200 G
= 400(M/P)S= 1600(M/P)d= 2Y –8000i Calculate the new level of
equilibrium interest rate (i) and equilibrium output (Y).(b)
Calculate the new levels of consumption (C) and investment (I)...
Consider the economy of Wiknam. The consumption function is given by C = 250+ 0.6(Y-T). a. Government purchases and taxes are both 100. In the accompanying diagram, graph the IS curve for r ranging from 0 to 8 by dragging and dropping the end points to the correct locations b. The money supply M is 2,875 and the price level Pis 5. In the accompanying diagram, graph the LM curve for r ranging from 0 to 8 by dragging and...
Suppose you are given IS: Y = 1250-50r and LM: Y = 450 + 30r , α = 2.5 M = 700 and P-2, Md (1/3) Y + 200-10r, Initial equilibrium Y 750, r-10 and 1=0 a) Evaluate numerically only the impact of fiscal policy on the income level (Y) when government expenditure is increased by $5 billions, under the conditions when: i Seitivity of investment demand to the interest rate is 0.001 and 100 Less sensitivity of Investment to...
Consider the economy of Wiknam. The consumption function is given by f. With the initial values for monetary and fiscal policy, suppose that the price level falls from 5 to 3. What happens ? What are the new equilibrium interest rate and level of income? C = 250+ 0.6(Y-T). The investment function is The LM curve shifts to the by about 383.33. I = 100-20r. What are the new equilibrium interest rate and level of income? The money demand function...
13./The economy has GDP is Y - 160; Consumption is C = 120 - 500 r; Taxes are T = 10; and Government purchases are G = 20 Investment is I = 100 - 1500 r; a. Is there a budget deficit or surplus? (circle) How much is the budget or surplus? G-T: 20-10 10 spub=-10 G>T then deficit - b. What is the supply equation? What is the demand equation? Y-C-G = 160-190-soor-20 r-c-G Supply: 20-50or -(-6) Demand: 100-1500...
(25pts) 2. Suppose the government wants to reduce its budget deficit. Using the long-run model of the economy developed in Chapter 3, illustrate graphically the impact of the alternative fiscal policy measures indicated in parts (a) and (b) below. Be sure to label: (i) the axes, (ii) the curves, (iii) the initial equilibrium values; (iv) the direction curves shift; and (v) the final equilibrium values. (15) a) Suppose the government decides to reduce the government's budget deficit by reducing government...
Question 1. Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C= 200 + 2/3(Y-T). Planned investment is 300, as are government spending and taxes. (18 points) a. If Y is 1,500, what is planned spending? Should equilibrium Y be higher or lower than 1,500? (4 points) b. What is equilibrium Y? (Hint: Substitute the values of equations for planned consumption, investment, and government spending into the equation Y C+I+ G and then...
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