This question asks you to think about the effects of a 10% increase in government purchases....
This question asks you to think about the effects of a 10% increase in government purchases. In answering the questions, you should take into account the fact that the government will have to finance its increase in purchases by raising taxes either now or in the future.
a. Suppose first that the increase is expected to be only temporary (that is, it starts today but last for one to two years). What will be the impact of the change on the current IS curve? On the current AD curve? Explain your answers and your assumptions fully.
b. Suppose instead that the increase is expected to be permanent (it starts today and last essentially forever). What will be the impact of the change in government purchases on the current IS curve? On the current AD curve? Explain your answers and your assumptions fully.
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This question asks you to think about the effects of a 10%
increase in government purchases....
Consider the previous increase in government purchases today. (a) What is the impact on the IS...
Consider the previous increase in government purchases today. (a) What is the impact on the IS curve assuming that there is a multiplier effect involved? Can you mention a reason why the multiplier can be high? (b) What is the impact on the IS curve assuming that the Ricardian equivalence holds? Explain why. (c) How are the intercept and the slope of the IS curve different in cases (b) and (c) above?
Suppose that Congress is going to increase government purchases on a permanent basis. Use the IS-LM/AS-AD...
Suppose that Congress is going to increase government purchases on a permanent basis. Use the IS-LM/AS-AD tools to analyze the implications in the short run and in the long run. (Assume the following. Prices are completely fixed in the short run and completely flexible in the long run. Taxes remain constat. Consumption is a function of disposable income, with a constant marginal propensity to consume. Investment is a function only of interest rate. Our starting point in full equilibrium output.)...
2. Suppose the government announces that it will reduce taxes for one year with no change in government spending. D...
2. Suppose the government announces that it will reduce taxes for one year with no change in government spending. Describe the effect of the temporary tax cut on output (Y), consumption (C), investment (I), and net exports (X) for each of the following assumptions about household consumption behavior. Explain your answers. a. Household follow the simple Keynesian consumption function. b. Households are forward-looking but do not anticipate a future tax hike which would completely offset the current tax reduction. c....
QUESTION 12 If inflation is too high, the RBA will (increase / decrease) its cash rate...
QUESTION 12 If inflation is too high, the RBA will (increase / decrease) its cash rate target. If the actual cash rate remains below the target, the RBA can intervene via open market sales ー ーーー ーー ーーー ーー ーーー ーーー ー (purchases / sales] of bonds. The yield curve is likely to shit (up / down), especially at its end The impact on the long end of the yield curve can be strengthened by convincing market (short/long) participants that...
2. Effect of a Change in Labor Market Regulations Recently the government has introduced a new...
2. Effect of a Change in Labor Market Regulations Recently the government has introduced a new set of complicated labor market regulations. As a results of this, the natural rate of unemployment ugoes up and the natural level of output Ya drops. Your friend, who knows nothing about the economy, asks you about the impact of such a change on the economy. You try to make use of your knowledge of the IS-LM model and AD- AS model to impress...
Part 1: Background knowledge: what is the role and objectives of the RBA (reserve bank of...
Part 1: Background knowledge: what is the role and objectives of the RBA (reserve bank of Australia) ? Using a graph created in a package like Excel, show how the cash rate has changed over time starting from 1990. Part 2: What are the current domestic conditions you think are relevant for deciding what to do to the cash rate? Part 3: What are the current external (foreign) conditions you think are relevant for deciding what to do to the...
Question 6 The government of Poortopia is concerned about the impact of pervasive poverty on the ...
Question 6
The government of Poortopia is concerned about the impact of
pervasive poverty on the health of its citizens. It is particularly
concerned about the rates of malnutrition and starvation being
experienced by its citizens. In order to combat this problem, the
government has decided to implement a food subsidy scheme. It’s
citizens will now be paid a specific subsidy of s per unit of food
they consume, where s is less than the prevailing market price of
food....
Please answer the following question. Please show all your work/explanation. This question asks you to recall...
Please answer the following question. Please show all your work/explanation. This question asks you to recall what you know about how we study the choices of individual consumers. We will focus on an American tourist consumer in Tehran who must decide how many Persian Rugs (R) and how many ounces of Saffron (S) to purchase. Assume our consumer has complete, transitive preferences over Rugs and Saffron and prefers more to less. Explain in words the meaning of these assumptions. Draw...
This assignment asks you to solve for equilibrium in a market and then look at the...
This assignment asks you to solve for equilibrium in a market and then look at the impact of a price ceiling, a price floor and a tax. The correct answers to these questions will vary across students. This is because the numerical values of some parameters are dependent on your student members. Suppose supply and demand for pizza are given by: Q" = 110 - OP QS = BP If the last digit of your student number is not 0,...
1 23 You are given the following information about an economy: Gross private domestic investment 50...
1
23
You are given the following information about an economy: Gross private domestic investment 50 Government purchases of goods and services 35 Gross national product (GNP) 300 Current account balance10 Taxes 60 Government transfer payments to the domestic private sector 30 Interest payments from the government to the domestic private sector10 (Assume all interest payments by the government go to domestic households.) Factor income received from rest of world 6 Factor payments made to rest of world8 Assuming that...
Suppose that Congress is going to increase government purchases on a permanent basis. Use the IS-LM/AS-AD tools to analyze the implications in the short run and in the long run. (Assume the following. Prices are completely fixed in the short run and completely flexible in the long run. Taxes remain constat. Consumption is a function of disposable income, with a constant marginal propensity to consume. Investment is a function only of interest rate. Our starting point in full equilibrium output.)...
2. Suppose the government announces that it will reduce taxes for one year with no change in government spending. Describe the effect of the temporary tax cut on output (Y), consumption (C), investment (I), and net exports (X) for each of the following assumptions about household consumption behavior. Explain your answers. a. Household follow the simple Keynesian consumption function. b. Households are forward-looking but do not anticipate a future tax hike which would completely offset the current tax reduction. c....
QUESTION 12 If inflation is too high, the RBA will (increase / decrease) its cash rate target. If the actual cash rate remains below the target, the RBA can intervene via open market sales ー ーーー ーー ーーー ーー ーーー ーーー ー (purchases / sales] of bonds. The yield curve is likely to shit (up / down), especially at its end The impact on the long end of the yield curve can be strengthened by convincing market (short/long) participants that...
2. Effect of a Change in Labor Market Regulations Recently the government has introduced a new set of complicated labor market regulations. As a results of this, the natural rate of unemployment ugoes up and the natural level of output Ya drops. Your friend, who knows nothing about the economy, asks you about the impact of such a change on the economy. You try to make use of your knowledge of the IS-LM model and AD- AS model to impress...
Question 6
The government of Poortopia is concerned about the impact of
pervasive poverty on the health of its citizens. It is particularly
concerned about the rates of malnutrition and starvation being
experienced by its citizens. In order to combat this problem, the
government has decided to implement a food subsidy scheme. It’s
citizens will now be paid a specific subsidy of s per unit of food
they consume, where s is less than the prevailing market price of
food....
This assignment asks you to solve for equilibrium in a market and then look at the impact of a price ceiling, a price floor and a tax. The correct answers to these questions will vary across students. This is because the numerical values of some parameters are dependent on your student members. Suppose supply and demand for pizza are given by: Q" = 110 - OP QS = BP If the last digit of your student number is not 0,...
1
23
You are given the following information about an economy: Gross private domestic investment 50 Government purchases of goods and services 35 Gross national product (GNP) 300 Current account balance10 Taxes 60 Government transfer payments to the domestic private sector 30 Interest payments from the government to the domestic private sector10 (Assume all interest payments by the government go to domestic households.) Factor income received from rest of world 6 Factor payments made to rest of world8 Assuming that...
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