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- i neeed it in word form.. not handwrittten Explain, with the aid of three separate IS-LM-FE diagrams, how a decrease in government purchases will affect real output, real interest rate and the general price level in three steps:(i) before the general price level adjusts;(ii) when the general price level is adjusting;(iii) after the price adjustment process is completed.Is the general price level increasing or decreasing during the price adjustment process? Explain the intuition of your answer with reference to the AD-AS framework.Suppose market partidpants expect the krona to appredlate relattve to the dollar. In the following graph, shft the supply curve, the demand curve, or both to illustrate the effects of the expectations described. D D QUANTITY (krona) True or False: The expectation that the krona would appreciate actually caused the krona to depreciate. O True O False PRICE (dollars per krona)2. Consider the following IS-LM model: C = 200+ 0.25Yd I = 150+ 0.25Y 1000i G = 250 T = 200 b. d = 2Y - 8000i MS 3200 and P = 2 a. Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I and G. M Now that the money supply increases to suppose 1,840. Solve for equilibrium Y, į c, and T, and describe in words the effects of an expansionary monetary policy on the equilibrium Y, i, c, and T. = c. Set M/P equal to its initial value of 1,600. Now suppose that government spending increases to G = 400. Solve for the new equilibrium Y, į, and C. Summarize the effects of an expansionary fiscal policy on Y, i, and C.
- Suppose that in Macroland the consumption and the investment have a negative relationship withthe real interest rate and positive relationship with Y. The Central Bank of the country targets acertain nominal interest rate and lets the money supply adjust in order to reach that interest rate.a. Draw a graph of the IS-LM model in this situation.b. Suppose that the Central Bank announces an increase of the interest rate in the future.Represent graphically the initial position of IS-LM curves. Then, show the IS-LM curves of thefuture, after the announced increase in the interest rate is implemented. (Assume that the ISis constant.).c. Suppose that agents today take into consideration the resulting income of the future whendeciding the amount of consumption and investment. Show what happens to the IS-LMcurves today after the announcement of the CB (tip: the CB is NOT increasing the nominalinterest rate today).d. The government decides to step in and avoid any deviation of Y from the initial…Using the macro model we learned in this class (MP-IS and AD-AS framework) consider the current crisis. 1. Identify the basic impacts of the Covid shutdowns on the macro economy. Explain how and why each curve will be affected. Graphically show your analysis. 2. Consider the monetary policy responses to the current crisis. Develop separate analysis for an economy which have positive policy rates vs an economy which is at the zero lower bound. Would it require different monetary policies? If so how? What would you expect to happen to the inflation rate, unemployment rate, economic growth in the near future? Use graphs for each case.Suppose in the real business cycle model that there is a simultaneous temporary increase inboth current government spending and in the current money supply. Draw diagrams for thelabour, goods and money market, and the production function. Determine the equilibriumeffects of these two shocks occurring simultaneously on employment, output, consumption,investment, money, real wages, the real interest rate, and the price level. Provide a detailedeconomic analysis explaining your results with the aid of the diagrams.
- COURSE: MACROECONOMICS - IS-LM MODEL Analyze and plot IN DETAIL the effect on the money market caused by an increase in the sensitivity of money demand to the level of income (i.e. "k*Y" in the equation of the money Market L = k*Y - h*i). Then, explain and plot how the equilibrium changes in the IS-LM model.3)Show and explain the effects of an increase in aggregate demand in the long-run and short-run by using AD–AScurves.2)Show and explain by using a graph, what will happen to the price level and real GDP if the quantity of moneyincreases and the increase is not anticipated; that is, the price level is not expected to change.1)By using aggregate demand (AD) and aggregate supply (AS) curves, show and explain the effects of ananticipated increase in money supply on macroeconomic equilibrium according to Rational ExpectationsHypothesis.It is generally agree, that the demand for real money balances (d depends on income Y, nominal rate of interest i, and expected inflation Ent. An economy has fallen into hyperinflation a la German 1922-1923, and you are required to estimate the flight from money phenomenon. Which of following demand for real balances is the appropriate choice? A. d = Constant B. (a = L(Y, i, En) C. d = L(i, En) D. a = L(En) E. None of the above is true
- Chapter 11: Aggregate Demand I: Building the IS-LM Model Question: The Keynesian cross shows ..... of and ....... in the ... run. Lütfen birini seçin: a. equality / planned expenditure / income / short O b. determination / equilibrium income / the interest rate / long. determination / equilibrium income / the interest rate / long. O d. equality/planned expenditure/ income / long. Pe determination/ equilibrium income / the interest rate / short.The government of Australia has embarked on various policies such as Job Keeperand provision of subsidies to firms in order to reduce the severity of COVID 19 on theeconomy. Suppose the money supply expands such that the Reserve Bank predictsthat the economic expansion is not sustainable.Use two diagrams one for the money market and another for the goods and services(Aggregate demand and Aggregate Supply model), to explain the policy that theReserve Bank can adopt in order to overcome the effect of increasing money supplyon the economy.Assume that: money supply increased from the equilibrium of AUD 40 billion to AUD 70billion Interest was reduced to interest rate of 1.5% as part of the stimulus packagefor the nation to overcome the effects of COVID 19. But the equilibrium interestrate is 4% Assume that equilibrium real GDP is AUD 60 billion Assume that inflation during COVID crisis was at equilibrium price of CPI 65 Assume that to overcome the inflationary crisis aggregate demand…conomics Consider a consumption function of C = 0.75 (Y – T). a) If government spending increases by $300 and there is a tax hike of $500 to fund thisincrease, according to the IS-LM model will the IS curve shift up or down and byhow much?b) Considering your shift in the IS curve from part a, how should the Federal Reserveadjust the money supply if they want to keep interest rates constant?