c) Suppose that the central bank doubles the money supply to 900. Draw a diagram, and explain in words what will happen. Find the new values of Y, r, and 1. d) Suppose now the money demand relationship was instead given by Mp 2Y - 50r What value of the money supply would result in the same outcome for Y and r that was obtained in part b)? Suppose the central bank initially sets the money supply at this value but then doubles it. What is the increase in Y that results from this doubling? Why do you think it is greater than the increase in Y that resulted from doubling the money supply in part c)?
Q: Price Level LRAS SRAS 108 100 AD1 90 ADo AD2 16.4 17.4 18.2 Real GDP $T 1. If the actual price level…
A: Disclaimer :- as you posted multipart questions we are supposed to solve the first 3 questions only.…
Q: Assume that the quantity theory of money holds and that velocity is constant at 4. Output is fixed…
A: Quantity theory of money refers to the equation that shows the relationship between money supply,…
Q: Suppose the economywide demand for money is given by: M = P(0.3Y − 25,000i). The price level P…
A: Md = P (0.3 Y - 25000i) P = 3 Y = 8000 At equilibrium, Md = Ms.
Q: cr+1 Consider the money supply Ms=mxB , m= cr+rr Assume that the demand for real money is given by…
A: Since the question you have posted consists of multiple parts, we will answer the first two parts…
Q: Suppose that the money demand function is (M/P)d = 800-50r, where r is the interest rate in…
A:
Q: Now, consider an economy in which the demand for money is of the formY(1 + it)for t = 0, 1, 2, · · ·…
A: Given: M= Y/(1+it)Y= 150, it= nominal interest rate in period t, real interest rate = 4%
Q: What is an implication of the neutrality of money in the long run?. (a) The economy's level of…
A: The neutrality of the money implies that the money supply does not affect the real variables such as…
Q: Suppose State Bank of Pakistan (SBP) reduces the money supply by 10 percent. What happens to the…
A: Note:- Since we can only answer one question at a time, we'll answer the first one. Please repost…
Q: Figure: Money Market I Interest rate, r TH Equilibrium Equilibrium interest rate Quantity of money…
A: The money market is a type of financial market in which institutions and dealers trade short-term…
Q: Use the following information for this problem: Goods Market: Asset Market: C = 3+0.5(Y-T) MS =…
A: C = 3+0.5(Y-T) MS = 25/P Assume that the P=1 initially I = 12-50r MD = Y - 50r T = 10 G = 10
Q: 1) Consider the following IS–LM model: C = 200 + .25YD, I=150+ .25Y - 1000i G = 250, T = 200 , NX =…
A: a. Solving for investment and consumption and then finding out Y :
Q: 1.1. Explain how the IS curve can be derived. 1.2 (i) Explain why we model the demand for real money…
A: The IS curve depicts all income (Y) and real interest rate (r) combinations that result in a goods…
Q: Consider the model of money demand we saw in class. Let the elasticity of money demand with respect…
A: Elasticity of money demand refers to the rate of change of money demand with respect to income or…
Q: Price Level LRAS SRAS 108 100 90 AD1 ADo AD2 16.4 17.4 18.2 Real GDP $T 1. If the actual price level…
A: Q4. Given : Actual price is $90.
Q: Suppose that each of the economy’s 600 young agents has deposits worth 100 goods with a bank no…
A: The monetary base (or M0) is the total amount of a currency in circulation, either in the hands of…
Q: Suppose that the central bank wants to stimulate the economy by increasing the money supply. The…
A: Quantity theory of money shows the relationship money supply and GDP.
Q: 19. Which of these statements is true according to the Keynesian (post-Keynesian) view a. Increases…
A: Keynesian believes that demand management is key to restore equilibrium in the economy. The economy…
Q: 2. Consider the money market model. Suppose that the current price is higher than the equilibrium…
A: In a market, the price level explains the market value of a specfiic good, services or any other…
Q: 35. The opportunity cost of holding idle money balances 1a ncreases as bond prices rise. Ob.…
A: Note:- Since we can only answer one question at a time, we'll answer the first one. Please repost…
Q: consider an economy in which the demand for money is of the formY / (1 + it)for t = 0, 1, 2, · · · ,…
A: Given: M= Y/(1+it)Y= 150, it= nominal interest rate in period t, real interest rate = 4%
Q: f. Judging by the impact of the money supply on nominal and real wages, is this analysis consistent…
A:
Q: Price Level LRAS SRAS 108 AD1 100 90 ADo AD2 16.4 17.4 18.2 Real GDP $T 1. If the actual price level…
A: The measure that depicts the difference between the actual output and potential output of the…
Q: Price Level LRAS SRAS 108 100 AD1 90 ADo AD2 16.4 17.4 18.2 Real GDP $T 1. If the actual price level…
A: The LRAS gives the potential level of GDP in the long run. If the economy is producing at a point…
Q: 8. Within the classical form of the quantity theory, the demand for money is given by Md = kPY %3D…
A: Equilibrium refers to the situation where money demand is equal to the money supply
Q: C = 100 + 0.5 - (Y – T) 1 = 500 – 1000 -r where Y is real output and r is the real interest rate.…
A: Given; C=100+0.5(Y-T) I= 500-1000r G=500 T=100 Y=2000 LM Curve is; MP=Y5i where; P=…
Q: Suppose that each of the economy’s 600 young agents has deposits worth 100 goods with a bank no…
A: Money is a commodity that is widely acknowledged as a medium of exchange by the general public. It's…
Q: Suppose that the central bank wants to stimulate the economy by increasing the money supply. The…
A: Answer in Step 2
Q: 4
A: Market in deflation or recession The contradictory phase in economy a situation happens when there…
Q: Suppose that the central bank wants to stimulate the economy by increasing the money supply. The…
A: According to the quantity theory of money, the price level is proportional to the money supply. If…
Q: This question is about the money market and the workings of central bank. a. How a central bank…
A: Since you have posted multiple sub-parts, I am answering the first three for you. If you want answer…
Q: If a central bank buys government securities from the private sector-money markets, leading to an…
A: The central bank is the apex bank that regulates the actions of all other banks in the country. It…
Q: The quantity theory of money: What is the key endogenous variable in the quan-tity theory? Explain…
A: Quantity theory of money: The quantity theory of money refers to the level of goods and services…
Q: Now, consider an economy in which the demand for money is of the formY / (1 + it) for t = 0, 1, 2,…
A: Given: M= Y/(1+it)Y= 150, it= nominal interest rate in period t, real interest rate = 4%
Q: Suppose the monetary base is an economy is equal to 100 and nominal GDP is equal to 10,000. The…
A: Money supply refers to the stock of money held by peoples in the economy at a given point of time.…
Q: Suppose that each of the economy’s 600 young agents has deposits worth 100 goods with a bank no…
A: Since you have asked a question with multiple sub-parts, we will solve the first three sub-parts for…
Q: The neutrality of money means that a change in money supply has no impact on output over any time…
A: Money is supposed to be neutral when the last time change in the Money supply or Money request makes…
Q: In the above figure, suppose that the economy has moved from point Dto point B.According to the…
A: If the economy moves from point D to B, AD1 shifts rightward to AD2.
Q: C) illustrate the impact of an expansionary monetary policy on the inflation rate and the price…
A: Monetary policy is the policy measures taken by central bank of country and with the help of…
Q: 1. Let’s consider a hypothetical economy where this year’s money supply is Tk.400, nominal GDP is…
A: Note:- Since we can only answer up to three subparts, we'll answer the first three. Please repost…
Q: The asset demand for money 'Da' is shown in the graph below. The transactions demand for money is…
A: The entire quantity of money that an economy's population desires to hold is known as the demand for…
Q: Money demand in an economy in which no interest is paid on money is Md p == 500 + 0.2Y -…
A: Given: The money demand is: p = 500 + 0.2Y - 1,000i Now, the P is = 100 Y = 1,000 I = 0.10 To Find:…
Q: Figure 34-3 (a) The Money Market (b) The Aggregate Demand Curve MS MD, MD. AD Y: Y, QUANTITY OF…
A: Aggregate demand slopes downward showing inverse relationship between price and quantity of output…
Q: Consider a hypothetical economy that produces at its long-ruń macroeconomic equilibrium at a price…
A: Price level = 100 Real GDP = 2% V= constant According to Quantity theory of money: MV = PT M-Money…
Q: Suppose the inflation rate is zero, the income elasticity of money demand is 0.75, and the interest…
A: Given, Income elasticity of money demand = 0.75 Interest elasticity of money demand = -0.25 (iv)…
Q: Suppose this year’s money supply is €100 billion, nominal GDP is €2 trillion and real GDP is €1…
A: a.Price level and velocity of money:
Q: The table below shows money demand and supply schedules for a hypothetical economy, Argentia.…
A: Answer: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the…
i need Solution of part c and d
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
- Task 3 Consider a closed economy where the goods and money markets are described by the following relationships: C = 200 + 0.9(Y – T) I = 400 – 15r M = 200 + Y – 100r P G = 150 T = 100 M = 2000 P = 2 Where Cis planned consumption, / is planned investment spending, Tis government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. a) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships. b) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). Compute also the level of consumption and investment spending in equilibrium and check whether the actual level of spending matches the equilibrium level of output. c) The government reduces taxation to T=50 in order to boost economic activity. Assume no changes in the values of all the other variables. 1. What is the immediate increase in income before the…QUESTION 2 Consider the closed-economy market-clearing model. Assume that the marginal propensity to consume is 0.8. Tax revenue decreases by $5 billion, while output and government spending remain the same (a) Calculate the dollar change in consumption. (b) Calculate the dollar change in national saving. (c) Does the equilibrium real interest rate increase, decrease, or stay the same? n toolhar nress ALT+F10 (PC) or ALT+FN+F10 (Mac).An open economy is described by the following system of macroeconomic equations, in which all macroeconomic aggregate are measured in billions of Namibian dollars, N$:Y = C + I + G + X –MC = 160 + 0.6 YdT = 100 + 0.25YX = 80I = 150G = 150M = 22 + 0.25YWhere: Yis domestic incomeYdis private disposable income C is aggregate consumption spending T is government tax revenue I is investment spending X represents exports M represents imports of goods and services. 1.1 (a)Determine the equilibrium level of income/ output. (b) Illustrate the aggregate spending curve and equilibrium level of income on a diagram. (c) Determine the surplus/ deficit in the government budget at equilibrium.(d) Determine trade balance at equilibrium. (e) Find the multiplier applicable to autonomous tax and interpret it.1.2 (a)Use the multiplier applicable to exports, to explain how a 100 billion decline in demand for exports could have affected the economy’s:(i)GDP/ output (ii)Balance of trade (iii)Government budget
- 3) In the macroeconomic model below, Y is aggregate output, C is aggregate consump- tion, Io is aggregate investment, Go is government spending, T is the total amount of taxes collected by the government, and t is income tax rate. The variables Y, C, and I are endogenous, Go, Io, and t are exogenous, and a, b, and k are parameters. Y=C+ Io + Go C=a+b(Y-T) T=k+tY (a > 0,6€ (0,1)) (k>0, t€ (0,1)) Calculate the determinant of the coefficient matrix A associated with this system of equations. The determinant of the coefficient matrix A is: 1-b.+ bt a) A b) A-1-b-bt + a c) |A|=b+t d) A1+a+b-t e) |A| =Go+b+t f) A-Io-b+t 8) A = Go + Io +b-tConsider the following model of an economy operating with fixed wages, prices and interest rates and hasexcess capacity. Adsume all figures are I Zambian kwacha. C=100+0.8yd, T=100+25Y, G=980 and I= 500 Where c is consumption, yd is disposable income, T is taxes net of transformers, G is government spending on goods and services and I is investments. A. Calculate the equilibrium level of national income B. Illustrate your equilibrium in the keyneasian cross diagran C. What is the value of the multiplier D. Is governnent running a surplus or a deficit E. Show the impact of a reduction in government spending by 80 on the equilibrium level of national income F. Illustrate your new equilibrium in the same Keynesian cross diagram as in b.View History Bookmarks Tools Window Help Coy, Jonnifer - Outlo X C Martin County School District X S MyPath - Home Content https://ezto.mheducation.com/ ext/map/index.html?_con%3Dcon&external_browser%3D0&launchUrl=https%25 Saved Level of Output and Income (GDP= DI) Consumption Saving APC APS MPC MPS S480. $-16 520 560 16 60 32 640 48 680 64 720 80 760 96 800 112 Des Instructions: Enter your answer as a whole number. b. What is the break-even level of income in the table? What is the term that economists use for the saving situation shown at the $480 level of income? (Click to select) Y c. For each of the following items, indicate whether the value in the table is either constant or variable as income chanc The MPS: (Click to select) The APC: (Click to select) The MPC: (Click to select) The APS: (Click to select) aw Prev 1 of 1 JAN 11 %24
- Problem 1. The following equations characterize country's economy. Assume that the economy is a closed economy. Production function: Y = A·K'N – 3·N²/2. where A = 5 and K = 21. Labor supply: N$ = 5 + 3w. Desired Consumption: Cd = 56 +0.75Y – 100r Desired Investment: Iª = 130 – 900r Government Spending: G = 300 (a) Find the equilibrium levels of the real wage, employment and output (you may want to go back and read your notes on labor market). (b) Find the equilibrium level of the real interest rate, consumption, investment and national saving. (c) Illustrate your answers to parts (a)and (b) with appropriate graphs. (d) Suppose that due to a wave of immigration, labor supply increases. The new labor supply curve is given by Labor supply: N$ = 25 + 3w. Find the new equilibrium values of the real wage, employment, output, the real interest rate, investment, saving and consumption. Illustrate these new answers in the graphs that you drew for part (c).Problems Exercise 1 Suppose a closed economy is represented by the following equations: Z= C+I+G C= co + C1x YD YD = Y-T T=100 I=0.2x Y-5000x i G=150 where Cis private consumption, I is investment, i is the interest rate set by the central bank; G is government spending, Y is income, Ypis disposable income and T represents taxes. Assume that co =250, i=2% (remember 2%=0.02), and c1 = 0.6. а. i. Given the above equations and variables, calculate the equilibrium level of output. ii. What is the multiplier for this economy? b. Now, assume that I is 0.1× Y-5000× i. Also, assume that co, C1, G, i and T remain unchanged: i. What is the new equilibrium level of output? How much does income change as a result of the change in ? What is the multiplier for this economy after the change in ? ii. ii. iv. What is the new level of consumption after the change in ? c. Assuming the same change as in (b), but letting G, i and T vary, which policies can the government do to achieve the same level of…2.2 Consider the following functions for a model economy: Consumption: C=C, +c (Y-T) Investment: I-1, +a Y -br Labour Supply: BN - W/P Money Demand: L-L, +kY - hi Production Function: Y AK"N Tax Revenue: T=T, +tY All variables with a subscript 0 denotes the autonomous component, e.g. C, is autonomous consumption. All lower-case letters (except the real interest rate r and the nominal interest rate I) are parameters. Government expenditure (G), the money supply (M), the level of technology (A) and capital stock (K) are all exogenously given. N is the level of labour employed. For this economy, the general price level (P) and the nominal wage rate (W) are fully flexible. The expected inflation is assumed to be zero.
- 6. You are given the following data concerning Freedonia, a leg- endary country: (1) Consumption function: C = 200 + 0.8Y (2) Investment function: I = 100 (3) AE = C + I (4) AE = Y a. What is the marginal propensity to consume in Freedonia, and what is the marginal propensity to save? b. Graph equations (3) and (4) and solve for equilibrium income. C. Suppose equation (2) is changed to (2´) I = 110. What is the new equilibrium level of income? By how much does the $10 increase in planned investment change equilibrium income? What is the value of the multiplier?Assume that the economy is now governed by a government and begins trading with other economies. The economy is described by the following set of equations. ?=1000+0.5⋅?d ID = 600 G=700 T=400 EX=0.1⋅Y IM=100+0.1⋅Y YD = Y - T Calculate the equilibrium level of output Y* a) 2857 b) 4000 c) 6274 d) 4400 Whats the government expenditure multiplier? Whats the tax multiplier? Whats the ba;anced budget multiplier?In an economy, consumers spend 800 million regardless of their level of disposable income. In addition, they spend 75% of their yearly disposable income. * Investment is fixed at 250 million, Gvt expenditures are 120 million, net taxes are 100 million, exports are 170 million. Imports are 15% of the level of disposable income. Q, what is this economies equilibrium level of output Q how much would net export be when this economy is at equilibrium output