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.

Expert Solution

Rahul Sunny answered 2 years ago

using an IS-LM-FE diagram as an aid, show the effect on a small open economy of...

using an IS-LM-FE diagram as an aid, show the effect on a small open economy of a permanent increase in the full-employment level of output. assume flexible exchange rates and assume that the domestic interest rate does not deviate from the foreign interest rate. explain what happens to output, the price level, net exports, the nominal exchange rate, and the real exchange rate. ( Please provide your answer in word format. not in your handwriting)

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.

1) Analyze and explain the IS* and LM * curves in the small open economy under...

1) Analyze and explain the IS* and LM * curves in the small open economy under the fixed and flexible ( floating ) exchange -rate system. Explain in detail the assumptions of the Mundell-Fleming Model, its limitations, and explain what occurs to the models variables as the economy moves from the short term ( when price is fixed) to the long term ( when price is flexible). Include diagrams of the appropriate economic models in your answer.

Using words and graphs analyze the macroeconomic effects of contractionary monetary policy in the short run....

Using words and graphs analyze the macroeconomic effects of contractionary monetary policy in the short run. Provide as much detail as possible.

Analyze the effects of quantitative easing policies using MS –MD model and IS –LM model.

Consider a closed economy, make sure to include an explanation. Using an IS-LM-FE framework analyze the...

Consider a closed economy, make sure to include an explanation. Using an IS-LM-FE framework analyze the consequences of the following event according to a Real Business Cylcle economist (also called a Neo-classical economist). Government spending increases temporarily.

IS-LM Model (Closed Economy) The following equations describe a small open economy. [Figures are in millions...

IS-LM Model (Closed Economy) The following equations describe a small open economy. [Figures are in millions of dollars; interest rate (i) is in percent]. Assume that the price level is fixed. Goods Market C = 250 + 0.8YD YD = Y + TR – T T = 100 + 0.25Y I = 300 – 50i G = 350; TR = 150 Money Market L = 0.25Y – 62.5i Ms/P = 250 Goods market equilibrium condition: Y = C +...

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...

A) Using the IS-LM model, show graphically and explain the effects of a monetary contraction. What...

A) Using the IS-LM model, show graphically and explain the effects of a monetary contraction. What is the effect on the equilibrium interest rate and level of output? B) Using the IS-LM model, show graphically and explain the effects of a monetary expansion. What is the effect on the equilibrium interest rate and level of output?

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...

Question