Assume that the IS-LM-BP model is an accurate abstraction of a real economy, and use the...

Assume that the IS-LM-BP model is an accurate abstraction of a real economy, and use the model to describe how the macroeconomic effects of a tightening of monetary policy differ between a closed economy and an open economy. Hint: be sure to first describe the IS-LM-BP model, and then show how fiscal policy shifts the curves and the economy reached a new equilibrium.

Expert Solution

Rahul Sunny answered 1 year ago

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/BP model, demonstrate the impact of the following events on the US economy(use graph)....

Using the IS/LM/BP model, demonstrate the impact of the following events on the US economy(use graph). Assume that the US has an upward sloping BP curve that is flatter (but not horizontal) than its LM curve. Assume that the exchange rate is flexible. a) An increase in government spending b)An increase in the money supply c)An increase in foreign GDP

Assume the economy is at full employment. Use the IS-LM/ AD-AS model to show the short-run...

Assume the economy is at full employment. Use the IS-LM/ AD-AS model to show the short-run and long-run impacts of a positive demand shock such as an increase in business confidence and investment spending on: the real interest rate (r), real GDP (Y), unemployment (U), consumption spending (C), the nominal money supply (M), the price level (P) and the real value of the money supply(M/P). You must present properly labeled (IS-LM and AD-AS diagrams to show the SR and LR...

Explain in detail the policy conclusions of the IS/LM/BP model

Task 6 Assess possible events that might affect these markets. Use the IS LM BP model...

Task 6 Assess possible events that might affect these markets. Use the IS LM BP model to frame your analysis:-What if: There was either expansionary fiscal or monetary policy What if relative interest rate rise (fall) What if social and political concerns impact trade Task 7 How exposed is the market to external shocks (e.g trade flows / NX) How exposed is the economy to internal shocks (eg. fluctuations in demand for money / regional shocks ) Specify the exchange...

Consider the IS-LM-BP model, where the BP curve is horizontal with perfect capital mobility. A decrease...

Consider the IS-LM-BP model, where the BP curve is horizontal with perfect capital mobility. A decrease in foreign interest rates will lead to a BoP deficit and a depletion in the Central Bank’s official foreign exchange reserves under fixed exchange rate regime. it is a true/false question and could you explain it briefly please?

As a review of the theoretical discussion of the IS-LM-BP model, do the following exercises: a)...

As a review of the theoretical discussion of the IS-LM-BP model, do the following exercises: a) Using the IS-LM-BP model, explain the effect of restrictive monetary policy on output when there is a flexible exchange rate regime and perfect capital mobility. b) How does the analysis in (a) changes if there is not perfect capital mobility? c) Using the IS-LM-BP model, explain how, with a fixed exchange rate regime, the government can reduce unemployment with a combination of expansionary fiscal...

(a) Using the IS-LM-BP model, explain the effects of a decrease in foreign price on domestic...

(a) Using the IS-LM-BP model, explain the effects of a decrease in foreign price on domestic economy under a flexible exchanger rate (b) Assumed that the BP curve is steeper than the LM curve. Using the IS-LM-MP model, analyze the effectiveness of the expansionary in fiscal and monetary policy under flexible exchange rates.

Use the IS-LM model of a closed economy to explain and graphboth the short run effects...

Use the IS-LM model of a closed economy to explain and graphboth the short run effects and the long-run effects of an increase in the money supply on national income, interest rate, investment, and the price level.

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.

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