Economic growth is shown in the AS-AD model as a Select one: O a. rightward shift in the short run AS curve. b. rightward shift in the AD curve. O C. rightward shift in the long run AS curve. O d. leftward shift in the short run AS curve.
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- Please no written by hand solution Consider a scenario of a closed economy in the short run where price level is fixed. Assume that bothtaxes and money supply increase in a way that keep output constant in equilibrium (suppose that themarginal propensity to consume is less than one). Which of the following may result from the policychange?a) It will lead to an increase in investment but a decrease in consumption.b) It will result in an increase in investment but a decrease in government spending.c) It will lead to an increase in investment and private saving.d) It will decrease investment but increase in public saving.With respect to their impact on aggregate demand for the U.S. economy, which of the following represents the cor-rect ordering of the wealth effect, interest-rate effect, and exchange-rate effect from most important to least im-portant?a. wealth effect, exchange-rate effect, interest-rate effectb. exchange-rate effect, interest-rate effect, wealth effectc. interest-rate effect, wealth effect, exchange-rate effectd. interest-rate effect, exchange-rate effect, wealth effectQuestion no1 Suppose in a closed economy, the government reduces her household incometax. Using relevant Classical Theories, explain its long-run effects on savings,real interest rates,s and investments. Question no 2 Suppose Country A is a small open economy with a trade deficit. With a risingconcern of plausible supply chain issues, business firms in Country A tend toincrease their level of inventory. Using relevant Classical Theories, explain how this would affect her netcapital outflow, real exchange rate and trade deficit in the long run.
- Consider the specific Macroeconomic model involving: Private sector consumption: C = 2400+0.8(Y-T); Y = GDP, T = Taxes Tax function: T = 125+0.12Y Business sector investment: I =67+0.08r; r = Rate of interest Government spending: G = 788 Exports: X = 192 - 28x; x = Exchange rate Imports: M = 345+0.09Y+2x; Y = GDP, x = Exchange rate Solve this model for the value of the equilibrium GDP (Y*), given that the interest rate is 7%, and exchange rate is $1.18. Please show all workConsider a small open economy with no perfect capital mobility whose Central Bank is explicitly targeting price level. If the government decides to decrease the tax level, what would happen with a new equilibrium domestic price level and real output? What the response of Central Bank should be? Please show your solutions using the model that we have developed (be sure to use BB and GM curves).Consider the relationship among exchange-rate changes, aggregate demand, and monetary policy. Assume we begin in a situation with real GDP equal to Y∗.Y*. Suppose the world price for raw materials rises because of growing demand for these products. Given that Canada is a net exporter of raw materials, what is the likely effect on Canadian aggregate demand? Show this in an AD/AS diagram (assuming no change in the exchange rate). Suppose instead that there is an increase in the demand by foreigners for Canadian financial assets such as government bonds. What is the direct effect on Canadian aggregate demand? Show this in an AD/AS diagram (assuming again no change in the exchange rate). Both of the shocks described above are likely to cause an appreciation of the Canadian dollar on foreign-exchange markets. As the Canadian dollar appreciates, what are the effects on aggregate demand in part (a) and in part (b)? Show these “secondary” effects in your diagram and explain. Given your…
- Consider the specific Macroeconomic model involving: Private sector consumption: C = 2400+0.8(Y-T); Y = GDP, T = Taxes Tax function: T = 125+0.12Y Business sector investment: I =67+0.08r; r = Rate of interest Government spending: G = 788 Exports: X = 192 - 28x; x = Exchange rate Imports: M = 345+0.09Y+2x; Y = GDP, x = Exchange rate Solve this model for the value of the equilibrium GDP (Y*), given that the interest rate is 7%, and exchange rate is $1.18.Consider a macroeconomic model for an open economy with the government. Consumption is given by C = 250 + bYd, where b = 0.8, Yd = (1-t)Y, and t = 0.1. Investment is given by I = 1,200 – 2,000R, and net export is given by X = 525 – 0.1Y – 500R. Assume that G = 1,200. Money demand is given by (Md/P) = 0.1283Y – 1,000R. Assume that P = 1, and the fixed money supply is given by (Ms/P) = 900. Drive the expression for the IS curve from the model. Drive the expression for the LM curve from the model. Drive the IS-LM equilibrium from the model.Japan and the United States are major trading partners and the exchange rate between the Japanese yen and the United States dollar is determined in a flexible foreign exchange market. Assuming real income increased in the United States. (b) Will each of the following increase, decrease, or stay the same as a result of the increase in the United States real income? (i) Japan's net exports. Explain. (ii) Unemployment in Japan. Explain. (iii) Japan's long-run aggregate supply
- ONLY Question 3 Use the IS-LM model to answer this question. Suppose that the government wants to lower the budget deficit but keep output constant. Discuss what mix of monetary and fiscal policy will achieve this goal. Provide your line of reasoning and justify the answer. Attach an appropriate graph to support your answer. 3. Assume now that the government cuts taxes and runs a budget deficit while the central bank pursues a tight monetary policy. Investigate what effect should this policy mix have? Analyze what (and why) will happen to investment?The Government has increased spending by TL 12 billion to increase aggregate demand in the economy. The IS-LM model tells us, aggragate demand will increase, but so will interest rates. The Government is worried that increasing interest rates will lead to crowding out. Which policy chould be implemented to keep interest rates at lower levels and prevent crowding out of private investment and consumption? a.The Government reduces taxes on consumption and investment b.Central Bank starts an asset purchasing facility to increase the money supply c.All of the above will have the same effect d.Central Banks increases the reserve ratio to reduce the money supplyAnswer only D &E ( No need to answer a,b,c) 18. Using AS-AD diagrams, illustrate each of the following economic situations by showing the patterns and shifts of either AS or AD that could cause them to happen: a. a rise in the price level triggered by higher oil prices; b. a rise in inflation that happens four years in a row because government spending keeps increasing; c. foreign investors gain confidence and increase the level of investment in the U.S. economy; d. the economies of trading partners grow very slowly, leading to a decrease in exports to those countries e. output declines slightly but the price level falls a great deal. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.