According to IS-LM model, under which circumstance, the increase in money is most effective in boosting the economy Select one: O a. IS curve is vertical. O b. IS curve is flat. O c.investment is not sensitive to output change at all. O d. Investment is fixed.
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- 2) The below five graphs show the development of key macroeconomic variables over the scope of three years in a certain country. Use them to draw an IS-LM-PC graph that captures the development in this country. Explain carefully what has happened. G Y t 3) China currently (2016) has a household saving rate of about 36 %. It has never been below 27 % in the last 30 years. What role do you think this high saving rate has for China's economic success? It has been argued that the low standard of living in many less developed countries depend on their poor institutions. Explain carefully what kind of "institutions" this argument refers to. 4) 5) The Swedish Fiscal Policy Council discusses public debt policy in a low interest environment in their latest report. The argue that "there are strong arguments in favour of low public debt despite low interest rates. For private operators, it may be rational to increase debt in a low interest rate climate, but this is not necessarily the case for…Let's say that Americans decide that home ownership isn't worth it anymore; instead, they all just move in with their parents. If Americans quit buying homes, this will cause AS to shift leftward due to a drop in consumption AS to shift leftward due to a drop in economic investment AD to shift leftward due to a drop in consumption AD to shift leftward due to a drop in economic investment is a venent policy ait illaue by a computer. Ine interest rate, amount to buy or sell in open market operations, etc., are all determined by an equation put into the computer. This approach is not supported by any American economists based on discretion O called rule-based policy described by all listed optionsIn an intertemporal model of consumption behaviour, a lower real interest rate means a budget line. O a. vertical O b. horizontal O c. steeper O d. flatter
- Consider the intertemporal model of consumption studied in class, with two possible periods. Consider initially that an individual is a borrower. If the interest rate increases: (a)The individual will never become a saver. (b)The individual will always remain a borrower. (c)The individual will be worse off, provided she remains a borrower. (d)The individual can be better off, but only if she becomes a saver. Both c and d.3. Assume that production function is Cobb- Douglas type, namely Yi = zika i N 1-a i (1) where i = 0, 1 indicates the two periods of the model. Derive the formula for the investment demand given the model parameters and other endogenous variables, like real wage and employment. Calculate al ad . How does the depreciation rate influence investment? ExplainIn each of the following cases, determine whether the IScurve shifts to the right or left, does not shift, or is indeterminate in the direction of shift.a. The real interest rate rises.b. The marginal propensity to consume declines.c. Financial frictions increase.d. Autonomous consumption decreases.e. Both taxes and government spending decrease by thesame amount.f. The sensitivity of net exports to changes in the realinterest rate decreases.g. The government provides tax incentives for researchand development programs for firms
- Assume a model with no government and no foregin sector If we gave a savings funcyion thatvis defined as s 200+ (0.1)Y and autonomous investment decreases by 50, by how much wikk consumption change?Consider the following time series representing % deviations from trend for Investment (black) and GDP (blue): 15 10 GDP -10 Investment -15 1940 1950 1960 1970 1980 1990 2000 2010 2020 Year Investment is... O Countercyclical and more volatile than GDP O Procyclical and more volatile than GDP O Procyclical and less volatile than GDP O Countercyclical and less volatile than GDP Percentage Deviation From Trend 5.Suppose that interest rates fall. This will cause: the present values of investment projects to fall; this will cause investment to rise a. Ob. the present values of investment projects to fall; this will cause investment to fall Oc the present values of investment projects to rise; this will cause investment to rise the present values of investment projects to rise; this will cause investment to fall Od.
- Every other thing equal, an increase in the risk of investment return would cause the IS curve to Select one: a. shift down and to the left b. remain unchanged O c. shift up and to the right O d. remain unchanged if the risk is small.Which of the following will NOT shift the ADTT curve? O a. A rise in consumer confidence O b. A rise in interest rates O c. A rise in government spending O d. A rise in exportsQ.1.14 In the Keynesian model, what is the most important determinant of ahousehold’s consumption?(a) Disposable income.(b) Total wealth.(c) The number of persons in the household.(d) Its’ net wealth. Q.1.15 Induced consumption is: (a) the part of consumption which is independent of the level of income.(b) the minimum level of consumption that is financed from sources otherthan income.(c) The maximum level of consumption that is financed from sources otherthan income.(d) shown by the slope of the consumption function.Q.1.16 In the Keynesian model, an introduction of a proportional tax will: (a) increase the slope of the consumption function.(b) reduce the multiplier.(c) increase the equilibrium level of income.(d) increase the multiplier.Q.1.17 A decrease in the price level will: (a) shift the AS curve to the left.(b) shift the AD curve to the left.(c) shift the AS curve to the right.(d) leave both the AD curve and the AS curve unchanged.