9.9 An economy is described as follows: Cd = 50 + .75(Y-T) - 100r Id =...
9.9 An economy is described as follows:
Cd = 50 + .75(Y-T) - 100r Id = 60 - 150r
L = (Y/3) - 400(i) pe = 0% G = 60 T = 60
M = 430 NFP = 0 i = r + pe
If the economy settles at a long run, general equilibrium in which P = 5:
(a) what is the long run, full employment level of Y?
(b) what is the long run, equilibrium r?
(c) what is the long run, equilibrium level of investment?
(d) IF the full employment level of Y changed to 425 (for a
reason that did not directly impact the goods or financial
markets), what would be the new long run equilibrium r?
(e)In this problem, if the central bank were to increase the money
supply by 110 (to 540) what would happen to Y and
r in the short run before P adjusts? (#’s
please)
(f)In this problem, if the central bank were to increase the money
supply by 172 (to 602), what would happen to Y and
P in the long run? (#’s please)
Homework Answers
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9.9 An economy is described as follows:
Cd = 50 + .75(Y-T) -
100r
Id =...
Stacked An economy is initially described by the following equations: C = 60+ 0.8(Y-T) I =...
Stacked An economy is initially described by the following equations: C = 60+ 0.8(Y-T) I = 120-5 M/P = Y-25r G = 200 T = 200 M = 3000 P = 3 a. Derive and graph the IS and LM curves. Use the accompanying diagram to graph the IS and LM curves by placing the endpoints at the correct location, then place point A at the equilibrium interest rate and level of income. IS: Y= LM: Y= IS: Y= LM:...
An economy is initially described by the following equations: C = 60 + 0.8(Y-T) I =...
An economy is initially described by the following equations: C = 60 + 0.8(Y-T) I = 120-5 M/P = Y-25 G = 200 T = 200 M = 3000 P = 3 d. Now assume that the central bank adjusts the money supply to hold the level of income constant. What is the new equilibrium interest rate? What must the money supply be? What is the tax multiplier? new equilibrium : 10 new money supply: 2400 tax multiplier: -4 Incorrect...
An economy is initially described by the following equations: a. Derive and graph the IS and...
An economy is initially described by the following equations: a. Derive and graph the IS and LM curves. Use the accompanying diagram to graph the IS and LM curves by placing the endpoints at the correct location, then place point A at the equilibrium interest rate and level of income. C = 60+ 0.8(Y-T) I = 120-5r M/P=Y-25r G = 200 T= 200 M = 3000 P=3 IS: Y= LM: Y= IS-LM Graph 800 850 900 950 1,000 1,050 1,100...
B4. Closed economy Keynesian model: The aggregate demand-side of the economy Rigidia is well-described by a...
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Suppose that the following equations describe an economy. Y = Cd + Id + G Cd...
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Consider the following extended classical economy (in which the misperceptions theory holds): AD SRAS Okun's Law Full employment output Natural unemployment rate Y- 300 10(MIP) Y 550 u = 0.09 Suppose that the money supply M 1,200 and that the expected price level, Pe, equals 40. What are the short-run equilibrium values of: The price level (P: 40 Enter the value rounded to one decimal place. Hint: You will need to use factoring or the quadratic formula and choose the...
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...
This is the complete question, no other outside information is given for this. Having trouble with...
This is the complete question, no other outside information is
given for this. Having trouble with it, please show work.
1. Canada is an open economy that is currently in a recessionary output gap (a) Draw a correctly labeled graph of the long-run aggregate supply, short-run aggregate supply, and aggregate demand curves, and show each of the following (i) The current equilibrium real output and price level, labeled as Y, and PL, respectively (ii) Full-employment output, labeled Y (b) The...
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Stacked An economy is initially described by the following equations: C = 60+ 0.8(Y-T) I = 120-5 M/P = Y-25r G = 200 T = 200 M = 3000 P = 3 a. Derive and graph the IS and LM curves. Use the accompanying diagram to graph the IS and LM curves by placing the endpoints at the correct location, then place point A at the equilibrium interest rate and level of income. IS: Y= LM: Y= IS: Y= LM:...
An economy is initially described by the following equations: C = 60 + 0.8(Y-T) I = 120-5 M/P = Y-25 G = 200 T = 200 M = 3000 P = 3 d. Now assume that the central bank adjusts the money supply to hold the level of income constant. What is the new equilibrium interest rate? What must the money supply be? What is the tax multiplier? new equilibrium : 10 new money supply: 2400 tax multiplier: -4 Incorrect...
An economy is initially described by the following equations: a. Derive and graph the IS and LM curves. Use the accompanying diagram to graph the IS and LM curves by placing the endpoints at the correct location, then place point A at the equilibrium interest rate and level of income. C = 60+ 0.8(Y-T) I = 120-5r M/P=Y-25r G = 200 T= 200 M = 3000 P=3 IS: Y= LM: Y= IS-LM Graph 800 850 900 950 1,000 1,050 1,100...
B4. Closed economy Keynesian model: The aggregate demand-side of the economy Rigidia is well-described by a standard IS-LM-FE framework while the short-run aggregate supply side is characterized by (SRAS) aggregate output/income, Y is the full employment output level, P is the Here Y is realized aggregate realized price level, Pe is the expected price level and b is a constant that depends on the slope of the labour demand curve. Explain the effects of each of the following on the...
Consider the following extended classical economy (in which the misperceptions theory holds): AD SRAS Okun's Law Full employment output Natural unemployment rate Y- 300 10(MIP) Y 550 u = 0.09 Suppose that the money supply M 1,200 and that the expected price level, Pe, equals 40. What are the short-run equilibrium values of: The price level (P: 40 Enter the value rounded to one decimal place. Hint: You will need to use factoring or the quadratic formula and choose 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...
This is the complete question, no other outside information is
given for this. Having trouble with it, please show work.
1. Canada is an open economy that is currently in a recessionary output gap (a) Draw a correctly labeled graph of the long-run aggregate supply, short-run aggregate supply, and aggregate demand curves, and show each of the following (i) The current equilibrium real output and price level, labeled as Y, and PL, respectively (ii) Full-employment output, labeled Y (b) The...
19. Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises. If the economy starts from long-run equi- librium and aggregate demand shifts right, what must the central bank do, and what will happen to output? a. The central bank must decrease the money supply, which will move output back toward its long-run level. b. The central bank...
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