IS curve: r = 30.30-0.0015Y LM curve: =Y - 500(r + n°) SRAS curve: Y = Y + 100(P – P°) The nominal money supply is M = 59, 400, expected inflation is = 0.10, and full employment output is Y = 20,000. a) If the economy begins in general equilibrium, what are the equilibrium values of the price level, output and the real interest rate? b) if the expected price level is the price level your found in part (a), what happens to the price level, output, and the real interest rate in the short run if there is an unanticipated decrease in the nominal money supply to 49281.25? - %3D

IS curve: r = 30.30-0.0015Y LM curve: =Y - 500(r + n°) SRAS curve: Y = Y + 100(P – P°) The nominal money supply is M = 59, 400, expected inflation is = 0.10, and full employment output is Y = 20,000. a) If the economy begins in general equilibrium, what are the equilibrium values of the price level, output and the real interest rate? b) if the expected price level is the price level your found in part (a), what happens to the price level, output, and the real interest rate in the short run if there is an unanticipated decrease in the nominal money supply to 49281.25? - %3D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

3
Consider an economy that begins in a situation in which output equals potential output. Consider the modified representation of the IS-LM diagram in which the y-axis is the nominal interest rate versus the real interest rate, where we take into account the presence of the zero lower bound (Graph A). Suppose that a collapse in house prices impacts the economy. 1. Use either the 4-point curved line drawing tool or the line drawing tool to show the effect on either the IS or the LM curve. Hint: Only one curve will shift. 2. Use the point drawing tool to indicate the new equilibrium output and nominal interest rate. Carefully follow the instructions above and only draw the required objects. Graph A 0- урот e₁ LM IS Select Line 4-point Curve Point
True or False: An increase in the price level will shift the LM curve to the right.
Question 1 There are three policy variables that the government and the Bank of Zambia control that have a major influence on the economy. Draw small sketch graphs and quick indications of the effects on Y and i of each variable moving both up and down while holding the other policy variables constant (i.e. there are six situations to consider). The first one is done for you as an indication of how to do the others: 1. Increase in G IS-LM Model i IS LM, Y increases i increases IS: IS, Y
3) i) What happens to the value of nominal interest rate in the economy when the Federal Reserve buys government securities? ii) What happens in the AD-AS model graph when the Federal Reserve buys government securities?
What is the impact of monetary and fiscal policy if (a) money demand does not depend on income, LM curve is horizontal; and (b) If money demand is extremely sensitive to interest rate, LM curve is horizontal.
Question 1 There are three policy variables that the government and the Bank of Zambia control that have a major influence on the economy. Draw small sketch graphs and quick indications of the effects on Y and i of each variable moving both up and down while holding the other policy variables constant (i.e. there are six situations to consider). The first one is done for you as an indication of how to do the others: 1. Increase in G IS-LM Model i IS LM, Y increases i increases IS: IS. Y Your answers for the other 2 must not exceed 1 page.
S 5 Despite gradual recovery from the Covid crisis, inflation in Japan remains below the Bank of Japan’s (BOJ) target of 2%. Use the IS/LM/FE model to predict the short-run and long-run effects of lowering interest rates (expansionary monetary policy) on Japan’s output, interest rate, and prices. Is this the appropriate policy to boost inflation? Show your graph.
Q15 Which of the following statements is consistent with a given (i.e., fixed) LM curve? Select one: a. A reduction in the interest rate causes money demand to decrease. b. A reduction in the interest rate causes investment spending to increase. c. An increase in output causes an increase in demand for goods d. An increase in output causes an increase in money demand.
A central bank should always conduct open market purchases whenever interest rates increase.” Comment on this statement with the help of an IS-LM diagram and explain the adjustment process
5.
Question 17 If the output gap is constant at minus 2 and the inflation rate has fallen from 6 percent to 5 percent, then next period's short-run aggregate supply curve might be TT= 5+2 (11-15) TT = 5-0.5 (13-15) TT = 4 +0.5 (13-15) TT = 5 +0.5 (13-15)