1. According to the spending hypothesis, great depression occurred due to a decrease in spending. This will lead to a contractionary shift of the IS curve. This may be attributed to the following factors.
2. Inorder to explain the situation of great depression, the monetary hypothesis is less significant due to the following reasons
Consult exhibit 2 then, answers the following questions: 1/ Using the IS-LM model, how does the...
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. Cause 2. Dynamics 3.draw a figure Ilallulul chsis that included debt deflation was the Great Depression, the worst et nomic contraction in U.S. history CATIO +The Mother of All Financial Crises: The Great Depressi In 28 and 192 prices doubled in the U.S stock market. Federal Reserve offcal vie market boom as excessive speculation. To curb it, they pursued a tigh monetary policy to raise interest rates; the Fed got more than it bargained for when th stock market...
1. A. Suppose in an economy, there is an exogenous fall in investment spending due to the burst of a housing bubble. Answer the following questions using the IS-LM-FX model. Which schedule shifts in the IS-LM model on impact? ii. i. What happens to the equilibrium output, interest rate, and exchange rate after this change? B. Suppose that following the decline in investment spending, the central bank decides to pursue an output stabilization policy. Answer the following questions comparing the...
Just e) f) and g) if possible please Question 5: The IS-LM model Consider the following IS-LM model: Consumption: C = 200 +0.25YD Investment: I=150 + 0.25Y - 10001 Government spending: G=250 Taxes: T=200 Money demand: L(i,Y)-2Y - 8000 Money supply: Ms /P=1600 (a) Derive the equation for the IS curve. (Hint: You want an equation with Y on the lefthand side and all else on the right) (b) Derive the equation for the LM curve. (Hint: It will be...
Using the IS-LM and Aggregate Supply-Aggregate Demand (AS-AD) models of Chapter 12 with a flat short-run AS curve (that is, completely sticky prices), suppose the economy is at the natural rate of unemployment and so, at long-run equilibrium. Suddenly, taxes are reduced with no change in government spending. Tell me (or show on a graph) what happens to the IS and/or LM curves. Show on a different graph what happens on the AS-AD diagram in the short-run (drawing in the...
1. List and explain the 3 tools of Federal Reserve Monetary Policy. 2. Explain how the Federal Reserve would use expansionary monetary policy to close a recessionary gap. Explain how the money supply, interest rate, investment spending, consumer spending, aggregate demand, real GDP, unemployment, and price level is affected. Illustrate this graphically below
Macroeconomic Multiple Choice Questions Answer All 10 Questions* 1) If the Central Bank of Kuwait puts in place an expansionary monetary policy, its decision is based on A) the fact that the economy is at full employment B) Expectation of excessive inflation in the future C) the fact that the economy is in an expansion D) Unemployment level is high 2) When the interest rate is set at a very low rate A) the opportunity cost of holding money is...
Question 4 Discuss the following statements: (a) According to the IS-LM model how would an increase of government spending affect equilibrium interest rates and income in a short-run closed macroeconomy. (b) According to the Classical Model of the aggregate economy, changes in aggregate demand have no effect on the amount of output produced, only the average pricelevel may be affected. (c) Crowding out through interest rates occurs when expansionary fiscal pol-icy causes interest rates to fall. (d) The relative bargaining...
2. (18 points) State whether each of the following statement is TRUE OR FALSE, and then briefly explain your answers (the explanation is what counts). 2.1. If the Fed lowers discount rate, it will shift LM curve to the right because it increases money demand. 2.2. When an economy is in the liquidity trap, neither monetary policy nor fiscal policy is effective in getting the economy out of recession. 2.3. Money demand is related to the functions performed by money....
In an economy where the money supply and aggregate demand have been decreased by the Central Bank, you know that the Central Bank is using 答案选项组 a contractionary monetary policy. an expansionary monetary policy. a loose monetary policy. follow expansionary fiscal policy How does monetary policy affect the market? 答案选项组 Monetary policy has a more of an impact on consumption than investment. Monetary policy has a more of an impact on government spending than investment. Monetary policy has an indirect...