MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
expand_more
expand_more
format_list_bulleted
Question
Chapter 16, Problem 10SQ
To determine
The impact on the equilibrium interest rate due to shift in the money supply.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
1. Suppose consumption C = 50 + 0.80 (YD), Government Purchases G = 50, Export
X 20, inflation rate is 2.5%. The net tax rate, t = 0.25. The marginal propensity to
%3D
%3D
import, m =
income of 400?
0.2. What level of Investment is needed to achieve a target equilibrium
There is an increase in government expenditures financed by taxes and its overall short-run effect on output is larger than the change in government spending. Which of the following is correct?
A) By themselves, both the change in the output and the change in the interest rate decrease desired investment.
B) By themselves, both the change in output and the change in the interest rate increase desired investment.
C) By itself, the change in the output decreases desired investment spending and by itself the change in the interest rate increases desired investment spending.
D) BY itself, the change in output increases desired investment spending and by itself the change in the interest rate decreases desired investment spending.
2) The following describes a certain economy
C = 400 + 0.75Id consumption function
I = 200 – 100r investment function
T = 70 + 0.2Y Tax Function
G = 100 Government Expenditure
X = 10 Exports
M = 150 + 0.06Y Import Function
Ms = 4000 Money Supply
M^D = 0.2Y – 10r Money Demand
Required
a) Derive the IS and LM equation
b) Calculate the equilibrium Y, C, T, M, and I
Chapter 16 Solutions
MACROECONOMICS FOR TODAY
Ch. 16.3 - Prob. 1.1YTECh. 16.3 - Prob. 2.1YTECh. 16.3 - Prob. 2.2YTECh. 16.A - Prob. 1SQPCh. 16.A - Prob. 2SQPCh. 16.A - Prob. 3SQPCh. 16.A - Prob. 4SQPCh. 16.A - Prob. 1SQCh. 16.A - Prob. 2SQCh. 16.A - Prob. 3SQ
Ch. 16.A - Prob. 4SQCh. 16.A - Prob. 5SQCh. 16.A - Prob. 6SQCh. 16.A - Prob. 7SQCh. 16.A - Prob. 8SQCh. 16.A - Prob. 9SQCh. 16.A - Prob. 10SQCh. 16.A - Prob. 11SQCh. 16.A - Prob. 12SQCh. 16.A - Prob. 13SQCh. 16.A - Prob. 14SQCh. 16.A - Prob. 15SQCh. 16 - Prob. 1SQPCh. 16 - Prob. 2SQPCh. 16 - Prob. 3SQPCh. 16 - Prob. 4SQPCh. 16 - Prob. 5SQPCh. 16 - Prob. 6SQPCh. 16 - Prob. 7SQPCh. 16 - Prob. 8SQPCh. 16 - Prob. 9SQPCh. 16 - Prob. 10SQPCh. 16 - Prob. 11SQPCh. 16 - Prob. 12SQPCh. 16 - Prob. 1SQCh. 16 - Prob. 2SQCh. 16 - Prob. 3SQCh. 16 - Prob. 4SQCh. 16 - Prob. 5SQCh. 16 - Prob. 6SQCh. 16 - Prob. 7SQCh. 16 - Prob. 8SQCh. 16 - Prob. 9SQCh. 16 - Prob. 10SQCh. 16 - Prob. 11SQCh. 16 - Prob. 12SQCh. 16 - Prob. 13SQCh. 16 - Prob. 14SQCh. 16 - Prob. 15SQCh. 16 - Prob. 16SQCh. 16 - Prob. 17SQCh. 16 - Prob. 18SQCh. 16 - Prob. 19SQCh. 16 - Prob. 20SQ
Knowledge Booster
Similar questions
- Exhibit 4 Interest Rate Amount of Money Demanded Asset $20 40 60 80 100 as an 10% 8 2 34. Refer to Exhibit 4. For transactions, households and businesses want to hold an amount of money equal to one-half of nominal GDP. The table shows the amounts of money they want to hold as an asset at various interest rates. If nominal GDP is $300 and the supply of money is $230, the equilibrium interest rate will be. a) 2 percent. 4 b) c) percent. 6 percent. d) 8 percent.arrow_forward1. As a result of an economic policy change, interest rates fall, and consumption and investment rise. This is consistent witha) A monetary expansion.b) A fiscal expansion.c) A fiscal contraction.d) A monetary contraction. 2. Under what conditions might the application of fiscal and monetary policy simply cause a change in the price level, and no change the level of national income.a) The aggregate supply curve is horizontal.b) The aggregate supply curve is vertical.c) The short run aggregate supply curve is flatter than the long run aggregate supply curve.d) The long run aggregate supply curve is flatter than the short run aggregate supply curve. 3. How might government best attempt to address the threat of long-run, structural unemployment, resulting from the globalisation of the economic environment?a) Adopt protectionist measures, such as tariffs.b) Give trade unions a formal role in economic planning.c) Increase subsidies for job retention in manufacturing industry.d) Improve…arrow_forward34. The difference between the two sets of graphs (Figure 1 and Figure 2) is that a) Figure 1 depicts changes in price level only, while Figure 2 shows changes in the rate of inflation. b) Figure 1 shows changes in autonomous spending, while Figure 2 shows changes in supply. c) Figure 1 depicts changes in price level only, while Figure 2 shows changes in autonomous spending (changes independent of price). d) Figure 1 shows changes in the mpc, while Figure 2 shows changes in autonomous spending.arrow_forward
- As interest rates rise, the effect on aggregate demand is to Select one: a. increase firm borrowing and investment spending. b. increase only firm borrowing. c. reduce consumer borrowing and consumption spending. d. increase consumer borrowing and saving.arrow_forward7. Paranoia, the largest country in central Antarctica, receives word of an imminent penguin attack. The news causes expectations about the future to be shaken. As a consequence, there is a sharp decline in investment spending plans. a. Explain in detail the effects of such an event on the economy of Paranoia assuming no response on the part of the central bank or the Treasury. (MP, T, and G all remain constant.) Make sure you discuss the adjustments in the goods market and the money market. b. To counter the fall in investment, the king of Paranoia calls for a proposal to increase government spending. To finance the program, the chancellor of the exchequer has proposed three alternative options: (1) Finance the expenditures with an equal increase in taxes (2) Keep tax revenues constant and borrow the money from the public by issuing new government bonds (3) Keep taxes constant and finance the expenditures by printing new money Consider the three financing options and rank them from…arrow_forward1. Suppose consumption C= 50 + 0.80 (YD), Government Purchases G = 50, Export X = 20, inflation rate is 2.5%. The net tax rate, t = 0.25. The marginal propensity to import, m= 0.2. What level of Investment is needed to achieve a target equilibrium income of 400?arrow_forward
- 10) Initially, an economy is in long-run equilibrium with a real GDP of $4 trillion. Suppose that the productive capacity of the economy increases by 50% and at the same time, the money supply increases at the same rate. 1.) Using the line drawing tool (possibly twice), show the effect on the economy. Properly label your new line. 2.) Using the point drawing tool, show the new equilibrium price level and output. Label the point E2. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardAn economy with zero net exports is described below: C = 100 + 0.8 (Y – T) I p = 80 G = 140 NX = 0 T = 170 The multiplier in this economy is 5. a. Find short-run equilibrium output.Instructions: Enter your responses as whole numbers. Short-run equilibrium output: b. Economic recovery abroad increases the demand for the country’s exports; as a result, NX rises to 100.Short-run equilibrium output (Click to select) increases decreases to .c. Assume that foreign economies are slowing, reducing the demand for the country’s exports, so that NX = -100. (A negative value of net exports means that exports are less than imports.)Short-run equilibrium output (Click to select) decreases increases to .d. Which of the following best describes the tendency of recessions and expansions to spread across countries?multiple choice Lower planned aggregate spending in one nation will reduce the amount of goods it exports abroad, thereby lowering the value…arrow_forward1.a)Draw an A.D/A.S graph showing inflationary gap. b)Draw an A.D/A.S graph showing a recessionary gap. c)Using the same graphs you have drawn in A and B, show what the long run equilibrium position would be in each case if the government did nothing(i.e.,let the economy self-adjust) 2.Explain how savings function is derived from the consumption function, and how the saving schedule and graph of the saving function are constructedarrow_forward
- 7) Suggest a policy mix to achieve the following objectives: a. Increase Y while keeping i constant. b. Decrease the fiscal deficit while keeping constant. What happens to i? To investment?arrow_forward3. Answer the following numerical questions about the IS-FX model. a. The consumption function is C = 1.5 + 0.5(Y – T). What is the marginal propensity to consume? What is the marginal propensity to save? b. The trade balance is TB = 5(1 – 1/E) – 0.2(Y – 8). What is the marginal propensity to consume foreign goods? What is the marginal propensity to consume home goods? c. The investment function is I = 3 – 10i. What is investment when the interest rate i is equal to 5%? d. Assume government spending is G. Add up the four components of demand and write down the expression for D. e. Assume forex market equilibrium is given by I = (1/E – 1) + 0.15, where the two foreign return terms on the right are expected depreciation and the foreign interest rate. What is the foreign interest rate? What is the expected future exchange rate?arrow_forwardThe consumption function is given by: C = 200+0.75 (Y-T). The investment function is I = 200-25r. G =100 T=100 1. The money demand function is Md = Y-100r. The Money supply M is 1000 and price is 2. Derive the LM equation.2. Find the equilibrium interest r and the equilibrium level of income Y, investment and consumption3. Suppose that the government purchases (G) raised from 100 to 150. How much does the IS Curve shift? What are the new equilibrium interest r and level of income, y? If there is no crowding out effect, what is the full multiplier effect of the change in G?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education