Given a close economy model where output is far below full employment, determine the effect of: A.) a debt-financed increase in government spending, B.) reduction in CB discount rate, on the following indicators at different regions of the LM schedule. The following are your choices of answers. Write the letter corresponding to your choice. Choices: I-Increase D-Decrease R-Remains the same U-Uncertain A. A debt-financed increase in B. Reduction in Central Bank discount rate Policy 5. At the government spending 2. At the Intermediate Region 3. At the Classical Region Intermediate Region 6. At the Classical Region What will 1. At the Liquidity Trap 4. At the Liquidity Trap

Given a close economy model where output is far below full employment, determine the effect of: A.) a debt-financed increase in government spending, B.) reduction in CB discount rate, on the following indicators at different regions of the LM schedule. The following are your choices of answers. Write the letter corresponding to your choice. Choices: I-Increase D-Decrease R-Remains the same U-Uncertain A. A debt-financed increase in B. Reduction in Central Bank discount rate Policy 5. At the government spending 2. At the Intermediate Region 3. At the Classical Region Intermediate Region 6. At the Classical Region What will 1. At the Liquidity Trap 4. At the Liquidity Trap

Macroeconomics: Principles and Policy (MindTap Course List)

13th Edition

ISBN:9781305280601

Author:William J. Baumol, Alan S. Blinder

Publisher:William J. Baumol, Alan S. Blinder

Chapter8: Aggregate Demand And The Powerful Consumer

Section: Chapter Questions

Problem 8DQ

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Given a close economy model where output is far below full employment, determine the effect of: A.) a debt-financed increase in government spending, B.) reduction in CB discount rate, on the following indicators at different regions of the LM schedule. The following are your choices of answers. Write the letter corresponding to your choice. Choices: I- Increase D- Decrease R- Remains the same U - Uncertain A. A debt-financed increase in government spending B. Reduction in Central Bank discount rate Policy 5. At the 2. At the 3. At the Intermediate Classical Intermediate Region 6. At the Classical Region Region Region What will happen to each of the following Indicators? 1. investment 2. intere rate 3. tax revenue 4. money supply 5. consumption 6. income 1. At the Liquidity Trap 4. At the Liquidity Trap
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I. Taiwan has an income tax rate, t1, of 28% and a Marginal Propensity to Save (MPS) of 0.4. It is in Eqm but is currently suffering from an "inflationary gap" of $350 m. (that is, Eqm Y>Y full employment, FE, aka Yn). Make the necessary calculations for the to policy that should be instituted. Provide the full name of this policy. II. Most economists believe that tariffs are not the best way to reduce the US trade-balance deficit -- the fact that US IM>US X. (Macro problems should be fixed with macro tools and tariffs are a micro tool.) Derive the identity for Y from the expenditure approach for an open economy to discuss what it means when a country is running a trade-balance deficit and whether it is an economic "good" or "bad." Then derive the twin-deficit identity and use it to explain why the US runs trade-balance deficits and what can be done, if anything, to reduce them. Make all your assumptions clear.