Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Chapter 9, Problem 5AP
To determine
To Evaluate: Effects on different economic variable under different condition using IS-LM model.
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If a firm believes that their relative price has changed, then they will increase their output, since their
product is more valuable (in relative price terms). Thus, the output of firms will be Y = Y +x (P - EP)
where alpha is the relative increase in work driven by an increase in expected price level
Thirty percent of firms can adjust their prices ex-post. If a=1, and the current price level is $200,
then draw the SRAS curve around the potential output of $10,000. Then, determine the increase
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a=0.02 and Y rises by $2400.
For the linear IS-LM model, the goods market and the money market are in equilibrium when. Suppose that the economy is characterized by the following equations: (Y;r) = ( 1200 ; 6), Y-C-IG=0, C-Co-c(Y-T)=0,I-Io+hr=0, and kY-ur-M^s=0, which are satisfied for Co=60, lo=150, G=250, T=200, M^s=60, with the parameters c=0.8, k=0.1, h=10, and u=10. How are the equilibrium
and affected,
a) if "h" (the sensivity of the demand for investment to the interest rate) decreases to 5?
b) if "u" (the sensitivity of the demand for real money balances to the interest rate) decreases to 5?
The U.S. economy is initially in short-run macro-equilibrium. Assume that, in the face of Covid-19, firms’ costs increase as they must comply with safety regulations to keep their employees safe at work. As a result, we observe the following in our economy:
Question 31 options:
a)
Both the price level and real GDP decrease
b)
The price level increases and real GDP falls
c)
The price level falls and real GDP increases
d)
Both the price level and real GDP increase.
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