QUESTION 1Consider the IS curve Ỹ₁=ā-b(R₁-r) and suppose ā=0¹ b=1, R₁ =r=5%, and the real interest rate falls to R₁' = 4%. In thistscenario, the economy would, in the short-run:a. move from its long-run equilibrium to 1 percent below its potential.b. move from its long-run equilibrium to 1 percent above its potential.c. remain at its long-run equilibrium.d. have reduced output.e. move from 1 percent below its potential to its long-run equilibrium.QUESTION 2According to the IS-MP / AS-AD framework, the increase in risk premia for private sector borrowing during the Great Recession causedin aggregate demand, leading toin output relative to potential output.a. an increase / a reductionO b. a reduction / a reductionO c. a reduction / an increased. an increase / an increase

IS-MP framework: IS-MP model is widely used to denote the simultaneous equilibrium in product and…

QUESTION 1 Ỹ₁=ā-b(R₁-r) and suppose a=0₁ b=1, R₁ =r=5%, and the real interest rate falls to R' = 4%. In this Consider the IS curve t scenario, the economy would, in the short-run: O a. move from its long-run equilibrium to 1 percent below its potential. Ob. move from its long-run equilibrium to 1 percent above its potential. O c. remain at its long-run equilibrium. O d. have reduced output. O e. move from 1 percent below its potential to its long-run equilibrium. QUESTION 2 According to the IS-MP / AS-AD framework, the increase in risk premia for private sector borrowing during the Great Recession caused in aggregate demand, leading to in output relative to potential output. O a. an increase / a reduction O b. a reduction / a reduction O c. a reduction / an increase O d. an increase / an increase

QUESTION 1 Ỹ₁=ā-b(R₁-r) and suppose a=0₁ b=1, R₁ =r=5%, and the real interest rate falls to R' = 4%. In this Consider the IS curve t scenario, the economy would, in the short-run: O a. move from its long-run equilibrium to 1 percent below its potential. Ob. move from its long-run equilibrium to 1 percent above its potential. O c. remain at its long-run equilibrium. O d. have reduced output. O e. move from 1 percent below its potential to its long-run equilibrium. QUESTION 2 According to the IS-MP / AS-AD framework, the increase in risk premia for private sector borrowing during the Great Recession caused in aggregate demand, leading to in output relative to potential output. O a. an increase / a reduction O b. a reduction / a reduction O c. a reduction / an increase O d. an increase / an increase

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

1. A change in autonomous spending results to a shift of the LM curve either to the left or right. O a. False; movement along the IS curve O b. False; movement along the LM curve O c. True O d. False; shift of the IS curve 2. Which of the following statements is true? 3. O a. The goods and money markets can never be in equilibrium. O b. The goods and money markets are in equilibrium at the points where the money market is in equilibrium. O c. The goods and money markets are in equilibrium at their point of intersection only. O d. The goods and money markets are in equilibrium at the points where the goods market is in equilibrium. Which of the following describes the steepest investment schedule? O a. 1-450-8(3) O b. 1=450-2(3) O c. 1=450-9(3) O d. 1=450-5(3)
3. Suppose the Bank of Canada reduces interest rate in the economy. Starting from a long-run equilibrium, use a graph to show what will happen to price level, real GDP, and employment in the short-run. Also, explain how output can return to the natural rate in the long-run without any government intervention.
3. Explain the wealth effect or the interest rate effect of why the aggregate demand (AD) curve is downward sloping.
Price Level 8 7 6 X 50 4 3 2 1 0 2 4 AS AD 6 8 10 12 14 16 18 20 Real GDP (in billions of dollars per year) billion. QE Instructions: Enter your responses as a whole number. a. Identify the macro equilibrium. Instructions: Use the tool provided 'QE' to identify the current macro equilibrium on the graph. The current macro equilibrium is when real GDP is $ Suppose that full-employment GDP is $13 billion. b. The real GDP gap is $ c. Aggregate demand must shift (left or right) by $ billion. billion to achieve the full-employment equilibrium.
A Moving to another question will save this response. Question 21 An increase in wealth from a substantial increase in stock prices will move the economy along a fixed aggregate demand curve. O A. true. O B. false. A Moving to another question will save this response.
If planned aggregate spending in an economy can be written as PAE = 12,000+ 0.80 Y 30,000r, and potential output equals 50,250, what real interest rate must the Federal Reserve set to bring the economy to full employment? a.5.5 percent b.7.0 percent c.4.5 percent d.6.5 percent
In the context of the money market and the LM curve, which of the following is true? O The LM is steep when the sensitivity of money demand to changes in income is large Points left and above a given LM reflect excess demand for money OA decrease in the money supply shifts the LM curve down to the right The slope of the LM is determined by the sensitivity of investment to changes in interest rates
Answer it correctly please. I will rate accordingly.
4. Consider a two period model with investment Imagine a preference shock that increases the representative consumer's utility for leisure. Therefore, the consumer chooses to consume more current leisure and less current consumption, and more future leisure and less future consumption. (everything else is equal) given the initial real interest rate r; a) What effect this preference shock has on labor supply curve? b) What effect this preference shock has on labor demand curve? c) What effect this preference shock has on output supply curve?
5) Suppose that: Mp = 800 + 0.2Y – 5000(r + n) P M5 = 1000 + 0.1Y – 3000n a. If n = 0.1 ;r = 0.1 ;Y = 2000, in equilibrium, what is the price level? b. What is the velocity? (using the same parameters as in a.) c. If output increases so that Y = 3000, what is the price level? d. What is the velocity? What is the change rate of the velocity? What does this number mean? e. Now, if a = 0.1 ;Y = 2000; and price level is forced to be P = 6, what is the equilibrium interest rate? f. What is now the velocity?
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
1