In the IS-LM model, an increase in government spending will result in An increase in income...
-
In the IS-LM model, an increase in government spending will result in
-
An increase in income and a decrease in the interest rate
-
An increase in inactive money balances and a decrease in saving
-
An increase in active money balances and a decrease in net taxes
-
An increase in consumption and a decrease in investment
Homework Answers
Answer 1
Government spending is a good market phenomena and thus will effect IS curve. Increase in government spending means that all interest rate now Equilibrium income in goods market will be higher and hence IS curve will shift to the right.
As LM curve remains the same(because LM curve is effected by Money supply and has no effect of government spending), this rightward shift of IS curve will result in increase in Income and increase in interest rate.
As income increases, consumption will also increase as consumption is directly related to income and as interest rate is inversely related to interest rate, Investment will decrease.
Hence, the correct answer is (d) An increase in consumption and a decrease in investment.
Add Answer to:
In the IS-LM model, an increase in government spending will
result in
An increase in income...
IS-LM What combination of policies would best reduce inflation? a) Increase taxes, sell government bonds b)...
IS-LM What combination of policies would best reduce inflation? a) Increase taxes, sell government bonds b) Decrease taxes, buy government bonds c) Decrease taxes, lower the reserve ratio d) Decrease government spending, lower the discount rate e) Increase government spending, raise the discount rate Use the IS-LM model. Your policy instruments are: Taxes, Government Spending, and the Money Supply. Describe a policy or set of policies that achieve the following objectives. Your answer should include a diagram to show how...
use the IS-LM model to answer this question. Suppose there is a simultaneous increase in government...
use the IS-LM model to answer this question. Suppose there is a simultaneous increase in government spending and reduction in money supply. Explain what effect this particular policy mix will have on ouput and interest rate. Base on your analysis, do we know with certainty what effect this policy mix will have on investment? Explain.
According to the IS-LM model, what happens in the short run to the interest rate, income,...
According to the IS-LM model, what happens in the short run to the interest rate, income, consumption, and investment under the following circumstances? a. The central bank increases the money supply. b. The government increases government purchases. c. The government increases taxes. d. The government increases government purchases and taxes by equal amounts.
According to the IS-LM model, what happens in the short run to the interest rate, income,...
According to the IS-LM model, what happens in the short run to the interest rate, income, consumption, and investment under the following circumstances? Be sure your answer includes an appropriate graph. The government increases taxes. ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ The price level decreases. ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ The central bank increases the money supply. ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ The government decreases government purchases. ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Consider the following IS-LM model. Starting from an equilibrium at interest rate rz and income Y2,...
Consider the following IS-LM model. Starting from an equilibrium at interest rate rz and income Y2, if there is an increase in government spending that shifts the IS curve to IS2, then in order to keep the interest rate constant: LM Interest rate, r LM LM 12 1'3 14 IS2 IS Y Y2 Y; YA Income, output, Y Select one: a. The Federal Reserve should increase the money supply O b. Cannot determine from the available information. c. The Federal...
Use the IS-LM model to predict the short-run effects of each of the following shocks on...
Use the IS-LM model to predict the short-run effects of each of the following shocks on income, the interest rate, consumption, and investment. In each case, explain what the Bank of Canada should do to keep income at its initial level. For each of these four shocks, (1) shift the appropriate curve in the IS-LM graph to reflect how the economy will respond to the shock; (2) indicate the impact of the shock on consumption, income, interest rate, and investment...
Use the classical (RBC) IS-LM-FE model to show the effects on the economy of a temporary...
Use the classical (RBC) IS-LM-FE model to show the effects on the economy of a temporary decrease in government spending. You should show the impact on the real wage, employment output, the real interest rate, consumption, investment, and the price level
Use the classical (RBC) IS-LM-FE model to show the effects on the economy of a temporary decrease in government spending. You should show the impact on the real wage, employment output, the real interest rate, consumption, investment, and the...
(1) Calculate the government spending multiplier if, an increase in government spending by $5 million increases...
(1) Calculate the government spending multiplier if, an increase in government spending by $5 million increases real GDP by $20 million. Group of answer choices 0.20 0.25 2 5 4 (2) A major benefit of automatic stabilizers is that they: Group of answer choices guarantee a balanced budget over the course of the business cycle. have a tendency to reduce the national debt. moderate the effect of fluctuations in the business cycle. require legislative review by Congress before they can...
5. In the Keynesian model which of the following would be most likely to have the largest impact on aggregate demand a. an increase in the money supply b. a change in government expenditure c. a chan...
5. In the Keynesian model which of the following would be most likely to have the largest impact on aggregate demand a. an increase in the money supply b. a change in government expenditure c. a change in investment expectations d. both a and c e. both b and c 6. In the Keynesian theory of liquidity demand and the interest rate which of the following occurs during excess supply of money. a. individuals sell bonds, driving interest rates down...
if crowding out occurs, an increase in government spending a) decreases the interest rate and consumption...
if crowding out occurs, an increase in government spending a) decreases the interest rate and consumption and investment spending rise b) decrease the interest rate and consumption and investment spending decline c) increases the interest rate and consumption and investment spending decline d) increase the interest rate and consumption and investment spending rise
IS-LM What combination of policies would best reduce inflation? a) Increase taxes, sell government bonds b) Decrease taxes, buy government bonds c) Decrease taxes, lower the reserve ratio d) Decrease government spending, lower the discount rate e) Increase government spending, raise the discount rate Use the IS-LM model. Your policy instruments are: Taxes, Government Spending, and the Money Supply. Describe a policy or set of policies that achieve the following objectives. Your answer should include a diagram to show how...
Consider the following IS-LM model. Starting from an equilibrium at interest rate rz and income Y2, if there is an increase in government spending that shifts the IS curve to IS2, then in order to keep the interest rate constant: LM Interest rate, r LM LM 12 1'3 14 IS2 IS Y Y2 Y; YA Income, output, Y Select one: a. The Federal Reserve should increase the money supply O b. Cannot determine from the available information. c. The Federal...
Use the IS-LM model to predict the short-run effects of each of the following shocks on income, the interest rate, consumption, and investment. In each case, explain what the Bank of Canada should do to keep income at its initial level. For each of these four shocks, (1) shift the appropriate curve in the IS-LM graph to reflect how the economy will respond to the shock; (2) indicate the impact of the shock on consumption, income, interest rate, and investment...
Use the classical (RBC) IS-LM-FE model to show the effects on the economy of a temporary decrease in government spending. You should show the impact on the real wage, employment output, the real interest rate, consumption, investment, and the price level
Use the classical (RBC) IS-LM-FE model to show the effects on the economy of a temporary decrease in government spending. You should show the impact on the real wage, employment output, the real interest rate, consumption, investment, and the...
5. In the Keynesian model which of the following would be most likely to have the largest impact on aggregate demand a. an increase in the money supply b. a change in government expenditure c. a change in investment expectations d. both a and c e. both b and c 6. In the Keynesian theory of liquidity demand and the interest rate which of the following occurs during excess supply of money. a. individuals sell bonds, driving interest rates down...
Most questions answered within 3 hours.
-
Transposable elements make up more than 40% of the human genome
and are inserted more-or-less randomly...
asked 15 seconds from now -
Can I get some samples of the following:
1) Write four sentences in first person, singular....
asked 4 minutes ago -
Described how search engines work. Be sure to describe in detail
.
asked 4 minutes ago -
The position of a particle as a function of time is given by
x=(2.0m/s)t+(−3.0m/s3)t^3. Part A...
asked 10 minutes ago -
If you wanted to insert a gene into a plasmid, why
would it be helpful to...
asked 9 minutes ago -
Provide your solved Excel Model Spreadsheet + Answer Report +
Sensitivity Report.
There are 1,400/2,500/1,200/700 applicants...
asked 9 minutes ago -
There are 32 chocolates in a box, all identically shaped. There are
12 filled with nuts,...
asked 22 minutes ago -
There are n candies on the table. Alice and Bob independently
pick k random candies each....
asked 21 minutes ago -
Complete the following probability table. (Round Prior
Probability and Posterior Probability answers to 2 decimal places...
asked 18 minutes ago -
In carrying out the first standardization in an experiment, a
student used 0.5449g of potassium hydrogen...
asked 18 minutes ago -
Consider the following information:
State Probability Stock A Stock B Stock C
Boom 0.65 0.26 0.17...
asked 21 minutes ago -
The equilibrium constant, Kp, for the following reaction
is 0.110 at 298 K:
NH4HS(s)
->NH3(g) +...
asked 26 minutes ago