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.
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use the IS-LM model to answer this question. Suppose there is a
simultaneous increase in government...
2. [10 points] Explain in detail what effect a Fed purchase of bonds will have on:...
2. [10 points] Explain in detail what effect a Fed purchase of bonds will have on: (1) the LM curve; and (2) the IS curve. 3. [10 points] Use the IS-LM model to answer this question. Suppose there is a simultaneous increase in taxes and red uction in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix...
- Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against...
- Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the...
Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the...
Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate (on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the demand...
t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted...
t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than...
Assume that there is a simultaneous increase in government spending and a monetary contraction. In a...
Assume that there is a simultaneous increase in government spending and a monetary contraction. In a flexible exchange rate regime, we know with certainty that such a policy mix will cause which of the following? A depreciation of the domestic currency None of the other answers is correct. A decrease in the domestic interest rate. O A decrease in output. A decrease in net exports.
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
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...
IS-LM-FX Model and Stabilization Policy Suppose the fiscal authority of an economy implements expansionary policy. Specifically,...
IS-LM-FX Model and Stabilization Policy Suppose the fiscal authority of an economy implements expansionary policy. Specifically, the government increases its spending. Consider the graphical illustration of the IS-LM-FX model and the analysis of the policy change, and answer the following questions comparing the initial equilibrium before any change was implemented to the equilibrium that prevails after the expansionary fiscal policy is implemented. a) What happens to the consumer spending, why? explain. b) What happens to the investment spending, why? explain....
Question 4 Discuss the following statements: (a) According to the IS-LM model how would an increase...
Question 4 Discuss the following statements: (a) According to the IS-LM model how would an increase of government spending affect equilibrium interest rates and income in a short-run closed macroeconomy. (b) According to the Classical Model of the aggregate economy, changes in aggregate demand have no effect on the amount of output produced, only the average pricelevel may be affected. (c) Crowding out through interest rates occurs when expansionary fiscal pol-icy causes interest rates to fall. (d) The relative bargaining...
MacroEconomics - Can someone answer these questions please? 17. Use the IS-LM model to answer the following questions....
MacroEconomics - Can someone answer these questions please?
17. Use the IS-LM model to answer the following questions. In this framework, investment depends on the interest rate and output. a. Suppose that the US federal government tries to cut its fiscal deficit. In an IS-LM diagram, show the effect of the cut in fiscal deficit on output and the interest rate. b. How will the reduction of fiscal deficit affect consumption, investment and private saving? Explain clearly.
2. [10 points] Explain in detail what effect a Fed purchase of bonds will have on: (1) the LM curve; and (2) the IS curve. 3. [10 points] Use the IS-LM model to answer this question. Suppose there is a simultaneous increase in taxes and red uction in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix...
- Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the...
Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate (on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the demand...
t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than...
Assume that there is a simultaneous increase in government spending and a monetary contraction. In a flexible exchange rate regime, we know with certainty that such a policy mix will cause which of the following? A depreciation of the domestic currency None of the other answers is correct. A decrease in the domestic interest rate. O A decrease in output. A decrease in net exports.
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...
MacroEconomics - Can someone answer these questions please?
17. Use the IS-LM model to answer the following questions. In this framework, investment depends on the interest rate and output. a. Suppose that the US federal government tries to cut its fiscal deficit. In an IS-LM diagram, show the effect of the cut in fiscal deficit on output and the interest rate. b. How will the reduction of fiscal deficit affect consumption, investment and private saving? Explain clearly.
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