Discuss the features of the IS-LM-FE model and explain how the model’s assumptions on the exchange...

Discuss the features of the IS-LM-FE model and explain how the model’s assumptions on the exchange rate and the sensitivity of international capital flows to interest rate differentials affect the slopes and the positions of the IS, LM and FE curves.

Expert Solution

Rahul Sunny answered 2 years ago

What are the primary uses of the IS-LM model to economic analysts? What are the model’s limitations...

What are the primary uses of the IS-LM model to economic analysts? What are the model’s limitations that must be understood in using the model for this analysis, especially of inflation?

Discuss the features of IS and LM curves. Is the equilibrium between IS and LM curve...

Discuss the features of IS and LM curves. Is the equilibrium between IS and LM curve curves always stable?

Explain the IS-LM model?

Use the classical (RBC) IS-LM-FE model to show the effects on the economy of a temporary...

Use the classical (RBC) IS-LM-FE model to show the effects on the economy of a temporary adverse supply shock; for example, an increase in the price of oil. You should show the impact on the real wage, employment, output, the real interest rate, consumption, investment, and the price level.

Explain the features of floating exchange rates superior to those of fixed exchange rates. Discuss the...

Explain the features of floating exchange rates superior to those of fixed exchange rates. Discuss the effects of the Bretton Woods System for floating exchange rates.

Compare the Closed-Economy IS-LM model, an Open-Economy IS-LM-BP model in which exchange rates are allowed to...

Compare the Closed-Economy IS-LM model, an Open-Economy IS-LM-BP model in which exchange rates are allowed to float freely, and an Open-Economy IS-LM-BP model in which exchange rates are held constant by the central bank. Specifically, use the three models to explain, and compare, the effects on GDP, interest, and the exchange rate of the national currency of: a. A sudden increase in government expenditures. b. A sharp increase in the discount rate and a massive sale of Treasury bonds by...

Using the IS-LM-FE model for a small open economy, analyze the effects of a contractionary monetary...

Using the IS-LM-FE model for a small open economy, analyze the effects of a contractionary monetary policy on output and the real interest rate in the short run and the long run. In each case, discuss the differences between the classical and the Keynesian models.

Use the IS-LM model to explain and show how the level of income and the rate...

Use the IS-LM model to explain and show how the level of income and the rate of interest are affected by each of the following changes in a closed economy respectively: (a) An autonomous decline in investment spending. (b) An increase in money supply. (c) An increase in government expenditure financed by an equal amount in taxes.

Derive the IS and LM curve in Keynes’s model. Using the IS-LM and AD-AS frameworks, explain...

Derive the IS and LM curve in Keynes’s model. Using the IS-LM and AD-AS frameworks, explain the working of Keynes’ model.

Use the IS-LM-PC model to explain how the economy adjusts to an increase in taxes in...

Use the IS-LM-PC model to explain how the economy adjusts to an increase in taxes in the medium run. Assume that the economy starts at a medium run equilibrium No graph necessary. Be sure to specify which curve shifts in the medium run. State how output, inflation, and the real interest rate change relative to the initial point where the economy started. Make sure that you state how inflation evolves differently under anchored expectations and under backward-looking expectations.

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