Question: In the IS-LM model an increase in . . increases the demand for .. by . . the .......... .......... interest rate which increases. ........... the money supply/goods and services / lowering / consumption. O a. b. taxes / goods and services /increasing /consumption. O government spending/goods and services / increasing/consumption. O d the money supply / goods and services / lowering / investment. O e. the money supply/investment goods / increasing / investment.

Question: In the IS-LM model an increase in . . increases the demand for .. by . . the .......... .......... interest rate which increases. ........... the money supply/goods and services / lowering / consumption. O a. b. taxes / goods and services /increasing /consumption. O government spending/goods and services / increasing/consumption. O d the money supply / goods and services / lowering / investment. O e. the money supply/investment goods / increasing / investment.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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(in trillions) anupuedgejetoally $35 $30 $25 $20 $15 $10 $5 $5 $10 $15 $20 $25 45° Line AE $30 $35 Real GDP (in trillions) The central bank has recently conducted monetary policy that substantially reduces the real interest rate. As a result, autonomous spending increases by $5 trillion. Examine the effects of this reduction in the real interest rate by identifying (1) the amount of autonomous spending before the real interest rate falls, (2) the amount of induced spending before the real interest rate falls, (3) the level of equilibrium Real GDP before the real interest rate falls, (4) the value of the spending multiplier, (5) the level of equilibrium Real GDP after the real interest rate falls, and (6) the amount of induced spending after the real interest rate falls.
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Chapter 10: Introduction to Economic Fluctuations Question: A distinction between the long run and the short run is that ... can affect .... and in the short run, whereas . .. in the long run. O a money supply /inflation/ money demand / money supply is more effective b. government / money supply/inflation/ supply is more effective O demand / output/ employment/supply is the ruling force Od. government/ inflation/ employment/ demand is more effective e. supply/output/ employment/ demand is more effective
The response of the economy to fiscal consolidation a. Use an IS-LM diagram to show the effects on output of a decrease in government spending. Can you tell what happens to investment? Why? b. Discuss the effects of fiscal consolidation on budget deficit and equilibrium output. How can monetary policy offset the effects of fiscal consolidation on output?
When the economy id experiencing a recessionary gap, how can expansionary monetary policy affect real output and the price level? An expansionary monetary policy can result in decreased real output and an increased price level. An expansionary monetary policy can result in increased real output and a lower price level. An expansionary monetary policy can result in decreased real output and a lower price level. An expansionary monetary policy can result in increased real output and an increased price level.
In the IS-LM model, an equal increase in government expenditure and tax will ...... , ....... and ........ a. increase income / increase interest rate / reduce investment. b. reduce income / reduce interest rate / increase investment. c. increase income / increase interest rate / leave investment unchanged. d. reduce income / reduce interest rate / leave investment unchanged e. leave income unchanged / leave interest rate unchanged / reduce investment.
1. Explain and show graphically how monetary and fiscal policies can be used in the IS-LM framework. Within a closed economy IS-LM model, analyse the effects on income, the interest rate, consumption, and investment of the following: a) A fall in the government budget deficit. Explain how your answer is affected by whether the reduced deficit comes about through a fall in government purchases or a rise in tax revenue. b) A fall in the money supply. 2. Suppose the Government wishes to reduce the budget deficit by reducing public spending while holding taxes constant. Assuming that the monetary authorities hold the money supply constant, explain why the decrease in government spending affects output more in the IS model than in the IS-LM model. Please note: To help explain your answers and analysis, you should always attempt to use diagrams, mathematical demonstration where applicable and convey the economic intuitions behind the results. Do not forget to label your graphs.
1. Consider an economy where the potential output is equal to the equilibrium output (i.e., 7 =Y) and the country is running a budget deficit (i.e., G>T). Suppose that the households in this economy become very thrifty. a. Using the IS-LM model, illustrate (draw a graph) and explain what happens to r and Y due to increasing thriftiness. b. If the government wants to stabilize output Y at its potential Y and balance the budget at the same time, illustrate (Draw a graph ) and explain what combination of monetary and fiscal policies should be implemented.
Figure 2 P. LRAS SRAS AD Y. Y. Refer to Figure 2. Suppose the economy is currently at point A. To restore full employment, the Federal Reserve should O a. purchase government bonds, which will reduce the money supply and shift the AD curve left. Ob sell government bonds, which will inerease the money supply and shift the AD curve right. purchase government bonds, which will inerease the moncy supply and shift the AD curve right. O d. sell government bonds, which will reduce the money supply and shift the AD curve left. P.
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Hi can you tell me if these are correct? they are true/false 20) In the classical view the money market has quickly adjustable interest rates which will equate aggregate savings and borrowing automatically. -true (the 'automatically' part is what is confusing me. I understand the market will adjust itself in the classical view, but I dont know if its AUTOMATIC or not...) 6) increases in AS reduce the rate of unemployment until you reach Qfe. -true 5) an increase in structural unemployment would be reflected as a shift of the vertical portion of the AS curve to the left- true these last two questions (#6 and #5) are both about the AS curve. Can you shift the AS curve? I thought that it symbolizes where Qfe was. can that shift too? and if it can, does that mean that the whole vertical portion of it moves?