1. Use the IS-LM model to show how an unexpected inflation could result in a higher...
1. Use the IS-LM model to show how an unexpected inflation could result in a higher short-run GDP.
2. Use the IS-LM model to show how an expected inflation could result in a higher short-run GDP. Explain using an
IS-LM diagram. Make sure you explain in words what happens in your diagram.
Homework Answers
The IS-LM model is a macroeconomic model that graphically
represents the short run relationship between output and interest
rates.
An increase in the expected inflation rate at a given level of
interest rate shifts LM curve to rights. As LM curve shifts to
right, interest rate decreases and income/output increases.
Inflation falls with increase in output.A rise in expected
inflation means same nominal interest rate is now associated with a
lower real interest rate.
In the diagram we can see that as expected inflation rate increase
LM curve shifts to right (LMo). This results in the decline of real
interest rate(r to ro) and increase in real GDP or output(Q to
Qo)
Add Answer to:
1. Use the IS-LM model to show how an unexpected inflation could
result in a higher...
1. Use the IS-LM model to show how an unexpected inflation could result in a higher...
1. Use the IS-LM model to show how an unexpected inflation could result in a higher short-run GDP. 2. Use the IS-LM model to show how an expected inflation could result in a higher short-run GDP. Explain using an IS-LM diagram. Make sure you explain in words what happens in your diagram. 3) Suppose a closed economy is initially in the long run equilibrium. Suppose the monetary base of this economy is $100 million, of which people carry $10 million...
3 2. Use the IS-LM model to show how an expected inflation could result in a...
3 2. Use the IS-LM model to show how an expected inflation could result in a higher short-run GDP. Explain using an IS-LM diagram. Make sure you explain in words what happens in your diagram.
1. Use the IS-LM model to show how an unexpected inflation could result in a higher...
1. Use the IS-LM model to show how an unexpected inflation could result in a higher short-run GDP.
1. Use the IS-LM model to show how an unexpected inflation could result in a higher...
1. Use the IS-LM model to show how an unexpected inflation could result in a higher short-run GDP.
1. Use the IS-LM model to illustrate the short run impact of this change in money...
1. Use the IS-LM model to illustrate the short run impact of this change in money supply on the equilibrium level of GDP and interest rate. Use a diagram and also explain in words. Make sure you show which curve shifts, and in which direction. 2. Assuming the fiscal and monetary policymakers do not do anything, what will be the long run level of GDP and interest rate? Use the same diagram you already drew to answer question 1. Make...
Use the IS-LM-PC model with an inflation-targeting central bank to answer the following short answer questions....
Use the IS-LM-PC model with an inflation-targeting central bank to answer the following short answer questions. In this question, you don’t need to explain or show the graph. But, when you’re not sure of the answer, don’t guess; instead, use the IS-LM-PC model to help you. An increase in the risk premium. Inflationary expectations are adaptive. i. What happens to inflation over time? ii. What does the central bank need to do to return to the medium-run equilibrium?
Suppose from now on that because of a virus, people become afraid of using currency and...
Suppose from now on that because of a virus, people become afraid of using currency and decide to deposit all the currency in banks, and carry money exclusively in the form of demand deposits. 4. What happens to the money supply? 5. Use the IS-LM model to illustrate the short run impact of this change in money supply on the equilibrium level of GDP and interest rate. Use a diagram and also explain in words. Make sure you show which...
6. 7. Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy...
6.
7.
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation, and Yn...
6. 7. Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy...
6.
7.
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation, and Yn...
please answer Question 7: Inflation targeting and the Taylor rule in the IS-LM model Consider a...
please answer Question 7:
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation,...
3 2. Use the IS-LM model to show how an expected inflation could result in a higher short-run GDP. Explain using an IS-LM diagram. Make sure you explain in words what happens in your diagram.
1. Use the IS-LM model to show how an unexpected inflation could result in a higher short-run GDP.
Suppose from now on that because of a virus, people become afraid of using currency and decide to deposit all the currency in banks, and carry money exclusively in the form of demand deposits. 4. What happens to the money supply? 5. Use the IS-LM model to illustrate the short run impact of this change in money supply on the equilibrium level of GDP and interest rate. Use a diagram and also explain in words. Make sure you show which...
6.
7.
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation, and Yn...
6.
7.
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation, and Yn...
please answer Question 7:
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation,...
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