Explain and/or show graphically, how the large increase in government spending would impact equilibrium in the IS-LM model. (You would need to clearly show/explain the path not just the result in the IS-LM model.) If drawing the graph(s), be sure to label all graphs, axis and any shifts of any curves.
Explain and/or show graphically, how the large increase in government spending would impact equilibrium in the...
4. Using the long-run model of the economy developed in Chapter 3, explain and/or show graphically the impact of increased investment demand has on the economy. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction curves shift; and v. the terminal equilibrium values. Be sure to explain what happens to: i. the real interest rate; ii. national saving; iii. investment; iv. consumption; and v. output. 5. Using the long-run model of...
11. Suppose there is an increase in autonomous investment . How would this shock impact a standard classical model? Written discussion and graphs are both needed for full credit Be sure to mention what happens to W,Y, N, P,r.C, s, Prs, Pus How would this shock impact a standard Keynesian model with perfectly sticky prices? Show graphs of the Keynesian cross, the Money market, and the IS/LM space. Note: Assume that change in investment does not impact the capital stock....
a) Using the Keynesian cross model where the goods market equilibrium is determined and analyzed, graphically derive the IS curve, and explain each step. Explain what the equilibrium in the goods market implies for the IS curve, i.e., why is the IS curve downward sloping. Also, explain what causes shifts in the IS curve b) First, based on the analysis of the financial market equilibrium, graphically derive the LM curve. Explain what the LM curve is and explain in detail...
An increase in government spending drives up or increases theprivate sector investment ." Explain this phenomenon using IS-LM model and evaluate its impact on AD-AS if any
Starting with a graph of the goods market and progressing using the IS-LM diagram show graphically and explain how an increase in government spending affects overall macroeconomic equilibrium.
Question #4: IS-LM Model: Change in Fiscal Policy (a) Suppose Congress had announced that they were going to increase government spending to G = 400. Assume that (M/P)Sreturns to 1600. Now the set of equations are the following: C = 200 + 0.25YDI = 150 + 0.25Y –1000i T = 200 G = 400(M/P)S= 1600(M/P)d= 2Y –8000i Calculate the new level of equilibrium interest rate (i) and equilibrium output (Y).(b) Calculate the new levels of consumption (C) and investment (I)...
Suppose a government decides to increase taxes. 30. Using the long-run model of the economy developed in Chapter 3, graphically illustrate the impact of on GDP. Be sure to label the axes, the curves, the initial equilibrium values, the direction curves shift, and the terminal equilibrium values.
Suppose a government decides to reduce spending and (lump-sum) income taxes by the same amount. Using the long-run model of the economy, graphically illustrate the impact of the equal reductions in spending and taxes. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. The direction the curves shift; and v. the terminal equilibrium values. b. State in words what happens to: i. the real interest rate; ii. national saving; iii. investment; iv. consumption;...
6. According to Prof Martin “An increase in government spending drives up or increases the private sector investment.” Explain this phenomenon using IS-LM model and evaluate its impact on AD-AS if any? (10 marks)
3. Deriving the IS Curve: Use an income/spending graph and IS curve graph to show the shortrun impact of an increase in the interest rate on output in the goods market. Include a brief explanation in your answer and be sure to properly label your graphs. 4. Shifting the IS Curve: Use an income/spending graph and IS curve graph to show the shortrun impact of an increase in autonomous investment on output in the goods market. Include a brief explanation...