Assume an economy is currently operating at point A. Illustrate using the IS-LM model how the policy recommendations you provide in c) will impact the economy. On your diagram indicate the new point that the policy takes the economy to and label this as point B.

Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?

Suppose a new government wins an election and announces that once it is inaugurated, it will increase the money supply. Use the DD - AA model to study the economy's response to this announcement.

What is the shape of a typical Hubbert Curve?

This question requires you to solve a macro model algebraically. Reading the appendix to this chapter will help you to answer this question. But, just in case, we lead you through it step by step. The equations for the model are as follows: i) C = c + MPC × YD consumption ii) I = I0 investment iii) G = G0 government purchases iv) T = tY net tax revenue v) X = X0 exports vi) IM = mY imports a. Step 1: Recall that Y D = Y – T. By using this fact, substitute the tax function into the consumption function and derive the relationship between desired consumption and national income. b. Step 2: Sum the four components of desired aggregate expenditure ( C, I, G, NX). This is the aggregate expenditure ( AE) function. Collect the autonomous terms separately from the induced terms. c. Step 3: Recall the equilibrium condition, Y = AE. Form the equation Y = AE, where AE is your expression for the AE function from part (b). (Your autonomous terms can be collectively labelled A and the terms that…

Assume an economy is currently operating at point A and answer the following question. Q. What key policy recommendations would you make for an economy like this one that is currently operating at point A? Illustrate using the IS-LM model how the policy recommendations you provide will impact the economy. On your diagram indicate the new point that the policy takes the economy to and label this as point B.

The general equilibrium in the IS-LM model occurs where a. the FE line intersects with the IS curve b. the FE line intersects with the LM curve c. the IS curve intersects with the LM curve d. Not information to tell .

Q1: Consider the IS-LM model. Suppose the economy of Economica is initially at the general equilibrium. This year, the weather in Economica is extremely good.   a. Explain and show graphically how a good weather shock affects the labor, goods, or the asset market. b. Explain and show graphically how a good weather shock affects the short-run equilibrium. c. Explain and show graphically how a good weather shock affects the general (long-run) equilibrium.