Consider the IS-LM AD-AS model (with adaptive expectations). Assume that the economy is initially in a long-run equilibrium where output is at its natural level and prices are as expected by workers. (a) What is the impact of an increase in government expenditures on the evolution over time of the interest rate, the output level and the price level. Carefully explain the economics behind these dynamics. What is the long term effect of this expansionary fiscal policy on investment?
Q: The following indices monitor the annual profits of J.A company. year 1 2 3 4 5 6 7 8 Index...
A: Introduction Base year is the value at which the value from other years has compared. Let's base yea...
Q: Eyeglasslux is a single-price monopolist in the eye-glass frame market. It faces a Market demand giv...
A: In the perfectly competitive market optimal condition is at that point where price is equal to margi...
Q: According to the excerpt in Source 4, how does President Kennedy use economics to build an argument ...
A: When there are more investments made in research and development then it will help to enhance the gr...
Q: An asset for drilling was purchased and place in service by a petroleum production company. Its init...
A: Every machinery after being purchased goes through wear and tear and thus losses it value what it wa...
Q: Will the TRAIN law lessen or worsen poverty and income inequality in the country of Philippines? How...
A: When a producer or consumer good is manufactured, cost takes place and process of business follow u...
Q: Which of the following is NOTa short run decision that a firm faces? (ר "If sales are not good, shou...
A: Answer to the question is as follows:
Q: How many Nash equilibria does this game have? hand written plzz
A: Nash equilibrium is states that the no player has an incentive to deviate from their strategy.
Q: There are two types of people in the economy: low and high risk. Each earns $100. When they are heal...
A: An economy is the system that organizes money, industry, and trade in a country or region.The econom...
Q: Assume that the LM curve for a small open economy with a floating exchange rate is given by Y= 200r ...
A:
Q: John made equal deposits at the beginning of every 3 months into an RRSP. At the end of 7 years, the...
A: Given the number of years = 7 Number depositing, n = 7 years x 4 = 28 Interest rate monthly = 2.50%/...
Q: Using the table below indicate which firm has (i) diseconomies of scale and (ii) constant returns to...
A: Increasing Return to Scale: An increase in the output is proportionally higher than the increase in ...
Q: for a firm's production process. The initial cost $200,000 with annual costs of $50,000 and saving o...
A: Given that, Annual cost = $50,000 Savings = $90,000 and increment by $3,000 (G) after year-1 Therefo...
Q: factors which could have an impact on the demand and supply ofvoil in the near term. whether on ba...
A: When product and service is manufactured all around the world, cost takes place and process of busi...
Q: In the two good specific factor model with diminishing returns to the factors the utility possibilit...
A: 1) In two good specific factor model, two goods are produced and three factors of production are use...
Q: What is theories and patterns of structural change in economic development? Explain in your own word...
A: The structural aspect of economic development is becoming increasingly crucial as the Ukrainian econ...
Q: C. Graph the isoquant for Qo = 20 and the isocost line. Label the tangency point E.
A: The cobb Douglas Production function The production function in the long run is Y=A(LK,N) Y= output ...
Q: Two firms produce Bliffs. They compete by simultaneously choosing prices in a single period. The dem...
A: Given:- P(Q)=100-2Q C1(q1)=20q1 C2(q2)=10q2 Please find the images attached for detailed solution.
Q: QUESTION 3 Which of the following has been the primary focus of economists in their analyses of publ...
A: Public economics is a branch of economics that studies public administration.
Q: 3. Consider two firms that simultaneously choose quantities q1, 42. The price per unit is specified ...
A:
Q: Refer to the graph shown. Assume the market is initially in equilibrium at point b in the graph but ...
A: The welfare loss due to tax is also known as the deadweight loss and it is equal to the difference b...
Q: What is linear stages of growth model in ecomonics? Explain by your own understanding
A: Linear stages theory - This a historical growth model given by Walter Whitman Rostow in 1960. His th...
Q: Name at least five products of the Philippine that is commonly exported for international use and ho...
A: Philippines exports a variety of goods These include Computers Electrical Equipment Fruits, nuts and...
Q: Suppose the government runs fewer budget deficit and there is a decrease in the average household in...
A: Here, it is given that government has fewer budget deficit, which influence the demand for loanable ...
Q: In the specific model with two consumption goods and labour (mobile) and land and capital (specific ...
A: The specific factors model is a short-run model in which the capital and land inputs are fixed but t...
Q: q bos ame imse nodudidnoo rip) aigam-Jeerigiri erlt to eelsa rlau9 aiaylens nigneM When a business h...
A: Since you have asked multiple question, we will solve the first question for you. If you want any sp...
Q: Which best describes workers’ compensation insurance? It is federally mandated but administered...
A: Workers' compensation, or "workers comp," is a government-mandated programme that pays benefits to e...
Q: Siven the Aggregate Expenditure schedule for Country A below. Calculate national income and net capi...
A: National income is summation of Consumption, Investment, Government expenditure and Net exports. O...
Q: The Kuznet's hypothesis has played an important role in shaping policy. (b) The Kuznet's hypothesis ...
A: The Kuznets curve infers that as a general public industrializes, the focal point of the economy shi...
Q: Which best describes due diligence? Having a standby amount of cash to open the restaurant. ...
A: Due diligence is a process that involves doing an investigation, audit, or review to verify facts or...
Q: If we observe that employers offer different wages based on which college someone graduated from bec...
A: Answer: Statistical discrimination is based on the satistical data available about the workers and l...
Q: Aggregate expenditure and Equilibrium output. Assume the following Consumption function (C) = 500 +(...
A: Aggregate expenditure function: AE = C + I + G + Ex - Im => AE = 500 + (0.65)YD + 400 + 300 + 400...
Q: If the demand for beef is relatively price elastic, due in part to the availability of would expect ...
A: Given that the demand for beef is relatively price elastic.
Q: Gomez runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent of $5,000...
A: "Accounting profit is obtained by deducting explicit costs (these costs represent the expenses of th...
Q: Compare and contrast the different approaches to environmental policymaking
A: Approaches to environmental policy making:- 1) Lawsuits 2) Economic policy tools 3) Command and cont...
Q: Marketers have found that, as they've aged, baby boomers have become less interested in fashion-rela...
A: Baby Boomers: The time period between 1946 to 1964 refers as the baby boom time period because durin...
Q: Question 13: Assume oat forward prices over the next 3 years are $2.30, $2.40, and $2.33, respective...
A: The forward price is considered as the settlement price of the transaction that would not take place...
Q: QUESTION 7 Excess demand exists when Select one: O a. quantity demanded does not equal supply. O b. ...
A: Since you have asked multiple question, we will solve the first question for you. If you want any sp...
Q: QUESTION 3 che Heckscher-Ohlin model with trade the wage in a countr True False
A: The Heckscher-Ohlin model is an economic theory that states countries should export what they can cr...
Q: Consider two developed and developing countries, the population growth rate of developed countries i...
A: At a steady-state, capital per worker is constant, that is investment is a breakeven investment.
Q: A 2015 report by the music industry estimated the revenue lost to the industry every year from illeg...
A: Budget constraint shows the combination of total expenditure of two goods with the given level of pr...
Q: Complete fhe following cash flow analysis questions: 5) Convert the following cash flows to a unifor...
A: We start the cash flow from year 3 . So , Outflows are : 1500 , 500 , 1250 , 1250 (Year 3 will c...
Q: A machine purchased for P150,000 its estimated life is 15 years, after which it will be sold for P40...
A: Sum of Years' Digits Depreciation Formulas The Sum of the years is calculated as 1+2+3+.......+n = n...
Q: If the cross-price elasticity between the price of good A and the demand for good B is zero, this im...
A: Cross price elasticity measures the responsiveness of quantity demanded of good1 with respect to cha...
Q: Part 1: Aggregate expenditure and Equilibrium output. Assume the following Consumption function (C) ...
A: The marginal propensity to save (MPS) basically refers to the percentage of an increase in overall ...
Q: A gym membership charges their current members a monthly fee on the 1" of the month. Monthly churn r...
A: This problem requires the knowledge of the following topics: 1) Random Variables. 2) Expected Value ...
Q: Country A and country B both have the production function ...
A: Production function in both countries : Y= F(K,L)= K 1/2 L 1/2 Converting this PF into per capit...
Q: A Php 1,500-bond which will mature in 10 years and with a bond rate of 15% payable annually is to be...
A: Given, Bond Price- Php 1500 Time- 10 years Rate- 15% Selling price- Php-1300
Q: Use the midpoint method for calculating all elasticity measures below Suppose the price of laundry ...
A: a brand has more elaticity, than overall laundry detergent because if the price of certain brand inc...
Q: 4. Notice that the production function of this economy exhibited not diminishing returns, but rather...
A: A change in wealth due to investment is known as capital accumulation. When the wealth increases due...
Q: Select TWO true statements about money. a. Base money is equal to cash plus commercial bank reserves...
A: Base money refers to the amount of money created by the central bank of the country. This can be det...
Step by step
Solved in 2 steps
- Assume that an economy is experiencing simultaneous equilibrium in both the product market and money market. Furthermore, assume the MPC is currently around a normal level of 0.65 and the sensitivity of real money demand to also around a normal level. Based on this information, answer the following questions: a) Using the AD-AS model and IS-LM model illustrate the impact of an expansionary fiscal policy. Label the initial points in both diagrams as A and the new points following the policy change as B.Assume that an economy is experiencing simultaneous equilibrium in both the product market and money market. Furthermore, assume the MPC is currently around a normal level of 0.65 and the sensitivity of real money demand to also around a normal level. Using the AD-AS model and IS-LM model illustrate the impact of an expansionary fiscal policy. Label the initial points in both diagrams as A and the new points following the policy change as B. If the MPC rises to 0.8 and also the sensitivity of real money demand to changes in the income rises well, use the IS-LM model to illustrate the impact of an expansionary fiscal policy. Label the initial point prioer to the fiscal policy as A and the new point following the expansionary policy as B. explain the reasons that underly differences in policy effectiveness.Assume that an economy is experiencing simultaneous equilibrium in both the product market and money market. Furthermore, assume the MPC is currently around a normal level of 0.65 and the sensitivity of real money demand to also around a normal level. Using the AD-AS model and IS-LM model illustrate the impact of an expansionary fiscal policy. Label the initial points in both diagrams as A and the new points following the policy change as B.
- Assume that an economy is experiencing simultaneous equilibrium in both the product market and money market. Furthermore, assume the MPC is currently around a normal level of 0.65 and the sensitivity of real money demand to also around a normal level. If the MPC rises to 0.8 and also the sensitivity of real money demand to changes in the income rises well, use the IS-LM model to illustrate the impact of an expansionary fiscal policy. Label the initial point prioer to the fiscal policy as A and the new point following the expansionary policy as B.Assume that an economy is experiencing simultaneous equilibrium in both the product market and money market. Furthermore, assume the MPC is currently around a normal level of 0.65 and the sensitivity of real money demand to also around a normal level. Based on this information, answer the following question: a) If the MPC rises to 0.8 and also the sensitivity of real money demand to changes in the income rises well, use the IS-LM model to illustrate the impact of an expansionary fiscal policy. Label the initial point prior to the fiscal policy as A and the new point following the expansionary policy as B.Draw an AS-AD model of an economy dealing with an inflationary gap. What is one fiscal policy that can be implemented to close this gap? Draw the effect of that policy. Explain how the model returns to long run equilibrium if the government does not intervene.
- Assume that an economy is experiencing simultaneous equilibrium in both the product market and money market. Furthermore, assume the MPC is currently around a normal level of 0.65 and the sensitivity of real money demand to also around a normal level. Based on this information, answer the following questions: b) What is meant by the term crowding out? In your answer also explain the implications of crowding out for the macroeconomy. (***explanation of crowding out where the concept is clearly defined and implications for the macroeconomy are fully discussed) c) If the MPC rises to 0.8 and also the sensitivity of real money demand to changes in the income rises well, use the IS-LM model to illustrate the impact of expansionary fiscal policy. Label the initial point prior to the fiscal policy as A and the new point following the expansionary policy as B. (***Correct fully labeled IS-LM Model shown including adjustment from the diagram in a) and correct position of points A and B.)An economy is in long-run macroeconomic equilibrium when each of the following aggregate demand shocks occurs. What kind of gap - inflationary or recessionary - will the economy face after the shock, and what type of fiscal policies would help move the economy back to potential output? How would your recommended fiscal policy shift the aggregate demandcurve? (Note: you do not need to draw anything).(a) A stock market boom increases the value of stocks held by households.(b) Firms come to believe that a recession in the near future is likely.(c) Anticipating the possibility of war, the government increases its purchases of military equipment.(d) The quantity of money in the economy declines and interest rates increase.Suppose that a local economy has the following values for Desired C, I, G, and NX at a price levelof 100 given by: C = 6,000 + 0.9(1 − t)YI = 3,100G = 900NX = 2,000 − 0.06YThe tax rate (t) is equal to 10%. For every $1 increase in the price level, AutonomousConsumption (C) and Autonomous Investment (I) each decrease by $1.It also has an aggregate supply (AS) given by: AS = 2p10. What is the Short-Run Real GDP in this economy? Show your work. 11. Is this economy running a primary budget surplus or a primary budget deficit? How largeis it (in dollars)? Show your work. Suppose also that this government has an outstanding debt of $10,000, owed with an interestrate of 1%.12. Is this economy running a total budget surplus or a total budget deficit? How large is it(in dollars)? What is this country’s debt-to-GDP ratio? Show your work. Suppose that the above questions (Q10 – Q11) is only for the year 2010. Assume thateverything is the same (Ceteris Paribus) in 2011 and 2012 as it was in…
- Determine how each of the following monetary or fiscal policy would shift the aggregate demand curve. Illustrate and explain the following effect. a. Assuming the economy is currently producing above the full employment output, the government decided to increase the personal income tax as a form of contractionary fiscal policy. Illustrate and explain the effect of the policy using AD-AS curve. b. With the recession due to COVID-19, the central bank has decided to lower down discount rates and reserve requirements of the commercial bank. Illustrate and explain the effect of the policy using AD-AS curve.1) The IS-LM Model a) In the IS/LM model explain what happens to equilibrium output and interest rate if governmentsimultaneously pursues expansionary fiscal policy and the central bank opts for a contractionarymonetary policy. Show with the help of a graph along with a very brief verbal explanation. b) Label the statements below as true or false and give a brief explanation for false statementsonly. i) For a given level of P (price), if M (nominal money) increases by 10%, M/P also increases by10% ii) A monetary expansion leads to a lower output and a higher interest rate. iii) Equilibrium in the financial market implies that an increase in income leads to a decrease ininterest rate making the LM curve downward sloping. c) Assume a model economy with the following parameters:C= 100 + 0.25 YD ; I= 100 + 0.5Y - 3000iG= 125 ; T= 100 ;(M/P)d = 6Y - 24000i ; (M/P)s = 4500Derive the IS and LM relation. 2) The short and medium run a) Suppose that the mark-up of goods prices over marginal…• Consider a baseline short run equilibrium where output is 16 trillion dollars, and the price level is 20. Note: In the Long Run Steady State Equilibrium, Price expectation is the same as price level & unemployment is 5% or lower. None of these are guaranteed in the short run. Usually, short run equilibrium is called an underemployment equilibrium.• Starting from the baseline, suppose COVID 19 hits this economy. Question What policies would you propose now (Monetary/Fiscal; Expansionary/contractionary)? As you know by now there are many different ways to implement Fiscal and Monetary policies. Which method did you select? (Cutting taxes, increasing taxes,reducing government expenditure, increasing government expenditure for fiscal policies, & lowering reserve ratio, increasing reserve ratio, OMO buying bonds, OMO selling bonds etc. for monetary policies.)
