MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
10th Edition
ISBN: 9781319467203
Author: Mankiw
Publisher: MAC HIGHER
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Question
Chapter 12, Problem 7PA
(a)
To determine
The impact of an increase in money supply in the short-run and in the long-run.
(b)
To determine
The impact of increase in government expenditures in the short-run and in the long-run.
(c)
To determine
The impact of increase in taxes in the short-run and in the long-run.
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Question 3 of 22
ⒸMacmillan Learning
The interest rate effect
is the change in exports and imports resulting from changes in the interest rate caused by changes in the aggregate
price level.
is the change in interest rates caused by changes to government purchases.
O is the change in investment spending and government purchases caused by changes in money demand.
O is the change in consumer and investment spending due to changes in interest rates resulting from changes in the
aggregate price level.
O is the change in real GDP caused by the Federal Reserve adjusting target interest rates.
4
REAL GDP (Billions of dollars)
2700
2600
2500
2400
2300
v
1956
1953
1954
1955
YEAR
1957
?
5.4 Using AS and AD curves to illustrate, describe the effects
of the following events on the price level and on equilih-
rium GDP in the long run assuming that input prices fully
adjust to output prices after some lag:
a. An increase occurs in the money supply above potential
GDP
b. GDP is above potential GDP, and a decrease in govern-
ment spending and in the money supply occurs
c. Starting with the economy at potential GDP, a war in
the Middle East pushes up energy prices temporarily.
The Fed expands the money supply to accommodate the
inflation.
Chapter 12 Solutions
MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
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Similar questions
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- You are given the following information regarding a hypothetical economy: Consumption function is C= 0.3+0.8(Y-T) Investment I=3.5- 50i G= 3 T= 2.5 The demand for real money is M/P=2+0.2Y-50i. The real stock of money is 3.arrow_forwardQ49 Suppose the economy is operating on the LM curve but not on the IS curve. Given this information, we know that________. Select one: a. the money, bond and goods markets are all in equilibrium. b. the money market and bond markets are in equilibrium and the goods market is not in equilibrium. c. neither the money, bond, nor goods markets are in equilibrium. d. the money market and goods market are in equilibrium and the bond market is not in equilibrium.arrow_forward2. Diagrammatically represent and explain the short-run effect of each of the following on the price level and on Real GDP: a. The dollar depreciates relative to foreign currencies. b. A decrease in the price of a non-labor resource. nt its long-ninarrow_forward
- The figure to the right shows an economy in an initial long-run equilibrium at point A. a. Using the line drawing tool, show how, if at all, the equilibrium real GDP and the long-run equilibrium price level are affected by a reduction in the quantity of money in circulation. Properly label this line. Carefully follow the instructions above, and only draw the required objects. b. According to your graph, the equilibrium price level while the equilibrium real GDP Price Level LRAS₁ A RGDP1 Real GDP ($ trillions per year) AD₁arrow_forwardLooking at the macroeconomic statistics for Kellytopia, you discover that at the beginning of the year, the national money supply was equal to $200 billion and by the end of the year it was equal to $193 billion. You also found out that the inflation rate in Kellytopia was-5%. In this case, you would expect the LM curve to shift up and to the left as the real money supply rises. O shift up and to the left as the real money supply falls O shift down and to the right as the real money supply falls. O shift down and to the right as the real money supply rises.arrow_forwardQ32 Which of the following will occur if there is an increase in taxes? Select one: a. The LM curve shifts and the economy moves along the IS curve. b. Neither the IS nor the LM curve shifts. c. The IS curve shifts and the economy moves along the LM curve. d. Output will change causing a change in money demand and a shift of the LM curve.arrow_forward
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