Carefully use the following information to answer below questions! Suppose you are given IS: Y 1250-50r...
Suppose you are given IS: Y = 1250-50r and LM: Y = 450 + 30r , α = 2.5 M = 700 and P-2, Md (1/3) Y + 200-10r, Initial equilibrium Y 750, r-10 and 1=0 a) Evaluate numerically only the impact of fiscal policy on the income level (Y) when government expenditure is increased by $5 billions, under the conditions when: i Seitivity of investment demand to the interest rate is 0.001 and 100 Less sensitivity of Investment to...
5. In the Keynesian model which of the following would be most likely to have the largest impact on aggregate demand a. an increase in the money supply b. a change in government expenditure c. a change in investment expectations d. both a and c e. both b and c 6. In the Keynesian theory of liquidity demand and the interest rate which of the following occurs during excess supply of money. a. individuals sell bonds, driving interest rates down...
Question 2: Money market Suppose that the money demand function is (M/P) = 0.75 Y - 200r The money supply M is 6000 and the price level is 2. a. Graph the supply for real money balances on a new graph (label it "figure 3"), and label the supply of real money balances (M/P). g. Suppose that the income is 6000. Complete Table 1 and draw the demand for real money balances curve ((M/P'] in figure 3. Find the value...
The following graph shows the money market in a hypothetical economy. The money supply is currently $200 billion, so the equilibrium interest rate is 0.5%, as shown by the grey star labeled A. Money Supply 0.9 0.8 New MS 0.7 .+ 0.6 INTEREST RATE (Percent) 0.5 Money Demand 0.4 0.3 0.2 0.1 0 800 100 200 300 400 500 600 700 QUANTITY OF MONEY (Billions of dollars) True or False: According to the Keynesian view of the economy, this economy...
2. Chapter 11, The Keynesian Cross (5 points): • In the Keynesian cross, assume that the consumption function is given by: C = 200 +0.75(Y - T) Planned investment is 100, government purchases and taxes are both 100. (a) Graph planned expenditure as a function of income. (b) What is the equilibrium level of income? (c) If government purchases increase to 125, what is the new equilibrium income? (d) What level of government purchases is needed to achieve an income...
For all the questions below select the appropriate answer: MP IMP Interest rate i INTY) Real money balances The money market in the diagram presented shows that with unchanged demand for money the market adjustment to an increase in real money supply: changes the price level to hold the real money supply constant has no effect on interest rates or bond prices. raises the equilibrium interest rate from it to lo as portfolio managers bid bond prices down. lowers the...
Consider the economy of Wiknam. The consumption function is given by C = 250+ 0.6(Y-T). a. Government purchases and taxes are both 100. In the accompanying diagram, graph the IS curve for r ranging from 0 to 8 by dragging and dropping the end points to the correct locations b. The money supply M is 2,875 and the price level Pis 5. In the accompanying diagram, graph the LM curve for r ranging from 0 to 8 by dragging and...
MacroEconomics - Can someone ask these questions please. Thank you! For questions 6 to 9, use the following information: where Yn denotes disposable income where i denotes interest rato where y denotes total income or production Consumption: C = 100 + 0.5Y)) Investment: 1 = 50 - 5001 Tax minus transfer: T = 200 Government spending: G = 500 Real money demand: M = Y - 40001 Real money supply: M = 1000 where P - 1 where P =...
You are given the following information about an economy(interest rate is measured in percentage points). A five percent interest is r = 5. 1. You are given the following information about an economy (note: the interest rate is measured in percentage points. A five percent interest is r5): (M/P) = 100 (M/P)"=0.2 Y - 10 C = 150+ 0.667 YD-10 I=200 - 10r + 0.1 Y G=200 NX = 50 | T = 0.25 Y YD = Y-T A. (i)...
Please box answers! Thank you. 11. Monetary policy and the LM curve Aa Aa The following graph shows the demand and supply of real money balances in a hypothetical economy. Use the black point (X point) to indicate the equilibrium in this market. Dashed drop lines will automatically extend to both axes. REAL INTEREST RATE [Percent) 10 Equilibrium Supply New Supply New Equilibrium Demand 3 0 10 20 30 40 50 60 70 80 90 100 REAL MONEY BALANCES Help...