Draw fully labelled graphs to get full credits. (a) Write out the IS relation and the...

Draw fully labelled graphs to get full credits. (a) Write out the IS relation and the LM relation (use the real money demand equals the real money supply). (6 points) (b) Suppose now the central bank increases the money supply. What open market operations will central bank exercise in this case? Draw the financial market diagram to show the effect on the interest rate for a given real output Y. (6 points) (c) Using your answer for (b), draw the IS-LM model to show the effects on the interest rate and output. What happens to the components of demand (C and I)? Explain why. (6 points) (d) Now suppose in addition to the expansionary monetary policy, the government want to reduce budget deficit at the same time. Draw the effects of these two policies together in one IS-LM graph. What happens to the equilibrium interest rate? Output? (6 points)

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Draw fully labeled graphs to get full credits. (a) Write out theIS relation and the...

Draw fully labeled graphs to get full credits. (a) Write out the IS relation and the LM relation (use the real money demand equals to real money supply).(b) Suppose now the central bank increases money supply. What open market operations will central bank exercise in this case? Draw the financial market diagram to show the effect on interest rate for a given real output Y.(c) Using your answer for (b), draw the IS-LM model to show the effects on interest...

Draw fully labelled graphs to get full credits. (a) Use the financial market diagram to derive...

Draw fully labelled graphs to get full credits. (a) Use the financial market diagram to derive the LM curve when there is an interest rate target. Explain. (b) What is the slope and intercept of the LM curve when there is an interest rate target? (c) When is a fiscal policy more effective at changing the level of output: when the central bank maintains a fixed real money supply or when the central bank sets an interest rate target? Draw...

3. Draw fully labeled graphs. (a) Write out the IS relation and the LM relation (use...

3. Draw fully labeled graphs. (a) Write out the IS relation and the LM relation (use the real money demand equals to real money supply). (b) Suppose now the central bank increases money supply. What open market operations will central bank exercise in this case? Draw the financial market diagram to show the effect on interest rate for a given real output Y. (c) Using your answer for (b), draw the IS-LM model to show the effects on interest rate...

Identify and explain the externality associated with the consumption of cigarettes? b) Draw a fully labelled...

Identify and explain the externality associated with the consumption of cigarettes? b) Draw a fully labelled diagram illustrating how the externality identified in part (a) above can be corrected from society’s point of view. c) The Australian government is considering running advertising campaigns to stop or a least slow down the purchase of cigarettes. What is the opportunity cost for the Australian Government if it chooses to do this? How does rational decision making help a government decide how much...

1.1 With the aid of a full y labelled diagram, draw a Production Possibility Frontier for...

1.1 With the aid of a full y labelled diagram, draw a Production Possibility Frontier for an economy producing maize and fish. Use the diagram to explain the concepts of choice, scarcity and opportunity costs 1.2 With the aid of a separate diagram explain what would happen if the African armyworm destroyed the maize production in the economy of 1.1 ceteris paribus 1.3 With reference to the diagram in 1.1, distinguish between 'efficiency' and' inefficiency'

Consider Gordon’s model of common property resources. Draw a fully labelled graph of the Gordon model...

Consider Gordon’s model of common property resources. Draw a fully labelled graph of the Gordon model Put these in order, low to high: Level of effort that will lead to extinction of the resource Level of effort that will produce the maximum sustainable yield Optimal level of effort that will maximize the value of the resource Open access/common property level of effort Why would an environmentally conscious producer overuse a common property resource? Relate your answer to the graph from...

Write out the full Hamiltonian for the Be atom.

Draw fully labeled graphs. (a) Use the financial market diagram to derive the LM curve when...

Draw fully labeled graphs. (a) Use the financial market diagram to derive the LM curve when there is an interest rate target. Explain. (b) What is the slope and intercept of the LM curve when there is an interest rate target? (c) When is fiscal policy more effective at changing the level of output: when the central bank maintains a fixed real money supply or when the central bank sets an interest rate target? Draw the IS-LM model and explain.

You must provide properly labeled graphs to get full credit Suppose there is a permanent increase...

You must provide properly labeled graphs to get full credit Suppose there is a permanent increase in the labor force (L) What will be the impact on the long-run level of real GDP (Y)? What will be the impact on private saving (Sprivate), public saving (Spub), national saving (S) What is the impact on the equilibrium interest rate?

Please fully define each of the following terms. You may also draw graphs to supplement your...

Please fully define each of the following terms. You may also draw graphs to supplement your definition: Total reserves Crowding out Full employment GDP Discount rate

Subjects