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...
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. 1. What happens to the money supply? 2.It sometimes happens that during a severe recession the unemployment rate decreases a bit long before the economy recovers. Why does that happen? 3.Consider the Solow model with exogenous growth. Assume that because of global warming the depreciation rate...
I 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 in form of currency/cash. 3. Assuming the banks keep a reserve ratio of 5%, what is the money supply in this economy? 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...
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 in form of currency/cash. 3. Assuming the banks keep a reserve ratio of 5%, what is the money supply in this economy? 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...
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 in form of currency/cash. 3. Assuming the banks keep a reserve ratio of 5%, what is the money supply in this economy? 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...
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...
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...
QUESTION 7 (25 points): Economic Fluctuation using AD-AS framework Suppose that the short-run aggregate supply curve has a positive slope and that the economy starts at a long-run equilibrium. Now imagine that 10 million people move to Australia they found that Australians live an average of 10 extra years due to the relax lifestyle that they enjoy. This is a permanent change in Labor in the U.S. economy. (a) (10 points) No Policy Intervention: Using the model of Aggregate Demand...
2. Suppose the economy of Diagon Alley contains 50,000 gold Galleons. a. If people hold all money as coin and currency, what is the quantity of money in Diagon Alley. b. If people deposit all of their gold coins in Gringotts Bank which maintains 100% reserves on deposits, what is the quantity of money? c. If people deposit all of their gold coins in Gringotts Bank which maintains only 10% reserves on deposits, what is the quantity of money? d....
Suppose a destructive wave of wildfires sweeps through the country of Tinderbox, which for the simplicity of our economic modeling is assumed to be a closed economy. Unfortunately, the fire causes the death of many of the country’s wild animals, but fortunately, no humans die and no buildings or equipment is damaged by the fires. The widespread destruction causes both autonomous consumption and autonomous investment decline. Please refer (label) the initial long-run equilibrium as point A, the new short-run equilibrium...