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Question 3: Using a policy mix Suppose that policymakers want to increase output (Y) while keeping...
Suppose that policymakers want to decrease the fiscal deficit. 3. Suppose that policymakers want to decrease...
Suppose that policymakers want to decrease the fiscal deficit.
3. Suppose that policymakers want to decrease the fiscal deficit A. Use an IS-LM graph to illustrate the effect on equilibrium GDP and interest rates if government spending is decreased, explaining briefly what happens. B. Use an IS-LM graph to illustrate the effect on equilibrium GDP and interest rates if taxes are increased, explaining briefly what happens. C. Suppose the policymakers want to reduce the fiscal deficit without decreasing GDP. Is...
Question 72 1 pts Suppose there is a policy mix of contractionary monetary policy and expansionary...
Question 72 1 pts Suppose there is a policy mix of contractionary monetary policy and expansionary fiscal policy. This combination of policies must cause: a reduction in i. an increase in output (Y). a reduction in Y. an increase in the interest rate (i). an increase in consumption.
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 a closed economy is initially in the long run equilibrium. Suppose the monetary base of...
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...
a)Draw the effect this policy will have in the IS-LM framework (1 graph, Method 3). Label...
a)Draw the effect this policy will have in the IS-LM framework
(1 graph, Method 3). Label all axes, curves, the new, and the old
equilibrium.
b)Using your graph from part (a), describe the equilibrium change
in 4 variables listed below following an increase in taxes:
1. Output:
2. The interest rate:
3. Consumption:
4. Investment:
c)Following the increase inT, suppose the Fed implements
contractionary monetary policy. Draw the effects of the Fed’s
reaction in the IS-LM framework (1 graph, Method...
Suppose policy makers want to increase net exports (NX) and keep output (Y) constant. Which of...
Suppose policy makers want to increase net exports (NX) and keep output (Y) constant. Which of the following policies would most likely achieve this? A. an increase in government spending B. a real depreciation C.an increase in government spending and a decrease in the real exchange rate D. a decrease in the real exchange rate and a tax increase
Consider the typical IS-LM set-up characterized by the following equations: IS : Y = C(Y -...
Consider the typical IS-LM set-up characterized by the following equations: IS : Y = C(Y - T) +I(Y, i) +G LM : M P = Y.L(i) Suppose the economy is in a short run equilibrium. The government decides to perform contractionary fiscal policy by increasing taxes. (a) (5 points) Draw the effect this policy will have in the IS-LM framework (1 graph, Method 3). Label all axes, curves, the new and the old equilibrium. (b) (5 points) Using your graph...
Macroeconomics (sixth edition), by Olivier Blanchard David R. Johnson, Pearson, 2012. , page 105-106 Consider the...
Macroeconomics (sixth edition), by Olivier Blanchard David R. Johnson, Pearson, 2012. , page 105-106 Consider the following IS–LM model: C = 200 + .25YD I = 150 + .25Y - 1000i G = 250 T = 200 1M>P2d = 2Y - 8000i M>P = 1600 Q4. (f) Now suppose that the money supply increases to M/P = 1,840. Solve for Y, i, c, and T, and describe in words the effects of an expansionary monetary policy Use IS-LM model to...
The graph below depicts an economy where an increase in aggregate demand has caused inflation. The...
The graph below depicts an economy where an increase in aggregate demand has caused inflation. The economy's current level of real GDP (Y) is above its long-run equilibrium. This is illustrated by the long-run aggregate supply curve (LRAS) and a price level 2) above the equilibrium value of Pe Fiscal Policy Price Level Real GDP Which of the following is an example of an automatic stabilizer that would help this economy move toward full employment again A reduced need for...
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...
Suppose that policymakers want to decrease the fiscal deficit.
3. Suppose that policymakers want to decrease the fiscal deficit A. Use an IS-LM graph to illustrate the effect on equilibrium GDP and interest rates if government spending is decreased, explaining briefly what happens. B. Use an IS-LM graph to illustrate the effect on equilibrium GDP and interest rates if taxes are increased, explaining briefly what happens. C. Suppose the policymakers want to reduce the fiscal deficit without decreasing GDP. Is...
Question 72 1 pts Suppose there is a policy mix of contractionary monetary policy and expansionary fiscal policy. This combination of policies must cause: a reduction in i. an increase in output (Y). a reduction in Y. an increase in the interest rate (i). an increase in consumption.
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...
a)Draw the effect this policy will have in the IS-LM framework
(1 graph, Method 3). Label all axes, curves, the new, and the old
equilibrium.
b)Using your graph from part (a), describe the equilibrium change
in 4 variables listed below following an increase in taxes:
1. Output:
2. The interest rate:
3. Consumption:
4. Investment:
c)Following the increase inT, suppose the Fed implements
contractionary monetary policy. Draw the effects of the Fed’s
reaction in the IS-LM framework (1 graph, Method...
Consider the typical IS-LM set-up characterized by the following equations: IS : Y = C(Y - T) +I(Y, i) +G LM : M P = Y.L(i) Suppose the economy is in a short run equilibrium. The government decides to perform contractionary fiscal policy by increasing taxes. (a) (5 points) Draw the effect this policy will have in the IS-LM framework (1 graph, Method 3). Label all axes, curves, the new and the old equilibrium. (b) (5 points) Using your graph...
The graph below depicts an economy where an increase in aggregate demand has caused inflation. The economy's current level of real GDP (Y) is above its long-run equilibrium. This is illustrated by the long-run aggregate supply curve (LRAS) and a price level 2) above the equilibrium value of Pe Fiscal Policy Price Level Real GDP Which of the following is an example of an automatic stabilizer that would help this economy move toward full employment again A reduced need for...
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