Question

In: Economics

In the IS-LM model, analyze the effects of increased optimism of businesses on all the endogenous...

  1. In the IS-LM model, analyze the effects of increased optimism of businesses on all the endogenous variables (Y, r, I, S, C, T, L1, L2).

Solutions

Expert Solution

In the IS-LM model, analyze the effects of increased optimism of businesses on all the endogenous variables (Y, r, I, S, C, T, L1, L2).

Answer: here Y, i, I are endogenous varibles endogenous means which determined within the model. If investment increase than output/ income increase and consumption also increases. Increase in investment shifts the LM curve outward leads to increase in output and decreases interest rate. Due to reduction in rate of interest demand for money increases . Diagram is given below

Hope answered you question please hit the like button and also provide your feedback thank you.

Rahul Sunny answered 8 months ago
Next > < Previous

Related Solutions

In the IS-LM model, analyze the effects of increased optimism of wealth-holders on all the endogenous...
In the IS-LM model, analyze the effects of increased optimism of wealth-holders on all the endogenous variables (Y, r, I, S, C, T, L1, L2).
In the IS-LM model, analyze the effects of increased optimism among banks on all the endogenous...
In the IS-LM model, analyze the effects of increased optimism among banks on all the endogenous variables (Y, r, I, S, C, T, L1, L2).
Analyze the effects of quantitative easing policies using MS –MD model and IS –LM model.
Analyze the effects of quantitative easing policies using MS –MD model and IS –LM model.
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.
Analyze the LM-IS model via the aid of diagrammes
Analyze the LM-IS model via the aid of diagrammes
Analyze the LM-IS model via the aid of diagrammes
Analyze the LM-IS model via the aid of diagrammes
1. Within the IS-LM model if the government increased investment while at the same time the...
1. Within the IS-LM model if the government increased investment while at the same time the central bank increased the money supply ... total income would increase. real interest rates would decrease. total income would stay the same. the real interest rate would stay the same. real interest rates would increase. total income would decrease. 2. Suppose the central bank decreases the money supply. In the the IS-LM model, this will lead to ... a rightward shift in the LM...
Analyze the Financial crisis 2009 in the US with the IS-LM model in the short-run and...
Analyze the Financial crisis 2009 in the US with the IS-LM model in the short-run and long-run, if there were no stabilization policies implemented.
Using the IS-LM model, analyze the effect of the following events on the economy. Show the...
Using the IS-LM model, analyze the effect of the following events on the economy. Show the graphs and explain the changes step-by-step (Example: Increase in tax rate => Lower disposable income => Lower Consumption => Lower AD => Lower output/income => Lower money demand => Lower interest rate). Due to the ongoing quarantine, the firms decreased autonomous investment. The government initiated a massive infrastructural improvement program. The Central bank increased its money supply. The technological revolution on the financial market...
Use the IS-LM model to predict the SR effects of each of the following shocks on...
Use the IS-LM model to predict the SR effects of each of the following shocks on income, the interest rate, unemployment, consumption, and investment. For each case, state how the economy moves from one point in the business cycle to another. A) After the invention of a new high speed computer chip, many firms decide to upgrade their computer systems. Explain what the central bank should do to keep income at its full employment level. B) A best- seller titled...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT