Answered: A) positive; interest rate and planned…

A) positive; interest rate and planned investment B) negative; interest rate and planned investment C) negative; interest rate and money demand D) inverse; price level and aggregate output

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter34: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 11PA

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7. What is the interest rate effect that explains why the aggregate demand curve slopes downward? A) It refers to the effect of changes in the price level on quantity of investment demanded which in turn affects interest rates. B) It refers to the effect of interest rates on borrowing which in turn affects consumption spending. C) It refers to the effect of changes in the price level on interest rates which in turn affects the quantity of investment demanded. D) It refers to the shifts in aggregate demand when interest rates change. 8. All other things unchanged, a higher exchange rate A) reduces net exports and aggregate demand. B) reduces net exports and increases aggregate demand. C) increases net exports and aggregate demand. D) increases net exports and reduces aggregate demand. 9. Suppose investment rises by $50 billion at each price level. If the value of the multiplier…
(17) Assume that the economy begins in long run equilibrium and the central bank increases the target interest rate. In the short run, what happens to the level of GDP? Group of answer choices (A) It stays the same (B) It goes up (C) It goes down
Desired consumption is C^d = 100 + 0.8Y - 500r - 0.5G, and desired investment is I^d = 100 - 500r. Real money demand is (M^d)/P = Y - 2000i. Other variables are πe = 0.05, G = 200, = 1000, and M = 2100. Find the equilibrium values of the real interest rate, consumption, investment, and the price level.
10. The breakeven point represents the level at which aggregate expenditures equal gross domestic product. True or false 12. The relationship between saving and the real interest rate is called investment demand. True or false 17. The daily use of the term investment, understood as the purchase of stocks or bonds, can cause confusion with the term capital invention. True or false
4. The following AGGREGATE OUTPUT / INCOME 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 CONSUMPTION 2,100 2,500 2,900 3,300 3,700 4,100 4,500 4,900 PLANNED INVESTMENT 300 300 300 300 300 300 300 300 a. At each level of output, calculate saving. At each level of out put, calculate unplanned investment (inventory change) What is likely to happen to aggregate output if the economy produces at each of the levels indicated? What is the equilib rium level of output? b. Over each range of income (2,000 to 2,500, 2,500 to 3,000, and so on), calculate the marginal propensity to consume. Calculate the marginal propensity to save. What is the multiplier? C. By assuming there is no change in the level of the MPC and the MPS and planned investment jumps by 200 and is sus tained at that higher level, recompute the table. What is the new equilibrium level of Y? Is this consistent with what you compute using the multiplier?
20. Consider the market for financial capital in the long run. The national saving curve is upward sloping because an increase in the real interest rate leads households to increase their current consumption. decreases the supply of private saving. leads to an increase in investment demand. decreases the supply of public saving. leads households to reduce their current consumption.
5. Assuming that nominal interest rates stay the same, an decrease in the rate of inflation would raise the real interest rate, which would tend to: a. increase or decrease investment spending. b. increase investment spending. c. not affect investment spending d. decrease investment spending.
AGGREGATE PLANNED OUTPUT/INCOME CONSUMPTION INVESTMENT 2,000 2,100 300 2,500 2,500 300 3,000 2,900 300 3,500 3,300 300 4,000 3,700 300 4,500 4,100 300 5,000 4,500 300 5,500 4,900 300a. At each level of output, calculate saving. At each level of out- put, calculate unplanned investment (inventory change). What is likely to happen to aggregate output if the economy produces at each of the levels indicated? What is the equilib- rium level of output?b. Over each range of income (2,000 to 2,500, 2,500 to 3,000, and so on), calculate the marginal propensity to consume. Calculate the marginal propensity to save. What is the multiplier?c. By assuming there is no change in the level of the MPC and the MPS and planned investment jumps by 200 and is sus- tained at that higher level, recompute the table. What is the new equilibrium level of Y? Is this consistent with what you compute using the multiplier?
Inflation in the Philippines this year has surged to 4.9% in 2022, exceeding the inflationtarget band set by the Bangko Sentral ng Pilipinas. In response, the BSP might raise theirkey real interest rate soon, which will in turn affect loaning and lending rates in thecountry. In response to these conditions, firms and investors are growing anxious and assuch, are planning on pulling back on their investments. Given all the information above, illustrate and explain the effects of the decrease ininvestment on the economy. Make sure to cover the following: shifts (if any) in theaggregate expenditure curve, the change in equilibrium output (i.e. identify and comparethe old and new level of equilibrium output in the graph, and the multiplier effect.
2) The following describes a certain economy C = 400 + 0.75Id consumption function I = 200 – 100r investment function T = 70 + 0.2Y Tax Function G = 100 Government Expenditure X = 10 Exports M = 150 + 0.06Y Import Function Ms = 4000 Money Supply M^D = 0.2Y – 10r Money Demand Required a) Derive the IS and LM equation b) Calculate the equilibrium Y, C, T, M, and I
Assume that the stock market experiences a massive rally, leading to a significant increase inhousehold wealth. Analyze the effects of this increase in household wealth:b. On national saving, investment, and the real interest rate (the goods market). Explain and showgraphically
8. Which of the following explain why the Aggregate Demand curve is downward sloping? a) An increase in the price level decreases the purchasing power of money denominated wealth, which in turn causes a decline in on consumption spending. b) An increase in the price level decreases the purchasing power of money, which means that more money is needed to purchase goods. This causes buyers of investment and durable goods to require bigger loans to finance their purchases. This, in turn, causes an increase in the demand for loanable funds which leads to a higher interest rate. A higher interest rate will reduce the real purchases of investment and durable goods. c) An increase in the price level makes goods relatively more expensive to foreigners causing them to buy less which means that net exports will decline. d) All of the above. e) None of the above. 9. Which of the following explain why the Aggregate Supply curve is upward sloping?…