8. The goods and money markets are in equilibrium at point/s a. a b. b C. C d. a and b b •C X Figure 1. LM IS Y 9. Which of the following statements relating to Figure 1 is/are correct? a. The money market is in equilibrium at point b. b. The goods and money markets are in equilibrium at point a. c. The goods market is in equilibrium at point a. d. All of the above

8. The goods and money markets are in equilibrium at point/s a. a b. b C. C d. a and b b •C X Figure 1. LM IS Y 9. Which of the following statements relating to Figure 1 is/are correct? a. The money market is in equilibrium at point b. b. The goods and money markets are in equilibrium at point a. c. The goods market is in equilibrium at point a. d. All of the above

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter26: Monetary Policy

Section: Chapter Questions

Problem 3P

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The following equations describe a small economy. Figures are in millions of dollars; interest rate (i) is in percent per annum. Assume that the price level (P) is fixed. Goods Market C = Co + cYD (Private consumption) YD = Y + TR – T (Disposable income) T = To + tY (Total taxes) I = Io – bi (Private investment) G = Go, TR = TRo (Gov. Expenditure and Transfers, respectively) Y = C + I + G (Goods mkt. equilibrium condition) Money Market L = kY- hi (Demand for real balances) Ms = Mo/P (Real money supply) L = Ms (Money mkt. equilibrium condition) Endogenous Variables: C, YD T, I, Y, L, Ms and i Exogenous Variables: Co = 300, To = 80, Io = 450, Go = 300, TRo = 100, Mo = 350, P =1 Parameters: c = 0.85, t = 0.15, b = 50, k = 0.25 and h = 62.5 Policy…
Q.1 The government of Imaginia feels that the economy is in a slump, with rising unemployment - it aims to boost the economy to full employment level but realizes output has to increase by $1 billion to do so. A) The value of expenditure multiplier is 5, what amount does it have to spend to reach its goal? Would this amount guarantee such increase in output in all situations? B) Draw a money market and an AD/AS diagram to show how, through printing money the government can temporarily achieve the same objective. money, the government can temporarily achieve the same objective.
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