M f. Now suppose that the money supply increases to = 1,840. Solve for Y, i, C, and I, P and describe in words the effects of an expansionary monetary policy. M equal to its initial value of 1,600. Now suppose that government spending P increases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, i, and C. g. Set
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- I have to analyze, using the IS-LM model, the macroeconomiceffects of an increase in savings in the short term and its implications for long-term growth. Specifically, I have to suppose that households (consumers) lose confidence and start saving more for any level of disposable income. Can you plase answer the following question (using graphs where possible): In terms of total savings and, therefore, of potential long-term growth, is a flat LM curve or a positive sloping LM curve better?I have to analyze, using the IS-LM model, the macroeconomiceffects of an increase in savings in the short term and its implications for long-term growth. Specifically, I have to suppose that households (consumers) lose confidence and start saving more for any level of disposable income. Can you plase answer the following question (using graphs too): In terms of total savings and, therefore, of potential long-term growth, is a flat LM curve or a positive sloping LM curve better?Suppose the public becomes more concerned about their future so they increase the percentage of their income devoted to savings. Based on the IS-LM model, which curve will shift and why? Predict the effects of this event on income, interest rate, consumption and investment. Income: ________________ Interest Rate: ____________ Consumption: ___________ Investment: ______________
- 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…Analyze, using the IS-LM model, the macroeconomic effects of an increase in savings in the short term and its implications for long-term growth. Specifically, suppose that households (consumers) lose confidence and start saving more for any level of disposable income. Please answer the following question (with graphs): How does the loss of consumer confidence affect production, investment andprivate savings? Does the attempt to save more necessarily lead to increased savings? Or will it lead to a decrease in savings?I have to analyze, using the IS-LM model, the macroeconomiceffects of an increase in savings in the short term and its implications for long-term growth. Specifically, I have to suppose that households (consumers) lose confidence and start saving more for any level of disposable income. The question is: Using the IS-LM model, show the effect of an increase in saving on production,investment and consumption, assuming that the Central Bank modifies the money supply when income changes, so that the LM curve is flat.
- I have to analyze, using the IS-LM model, the macroeconomic effects of an increase in savings in the short term and its implications for long-term growth. Specifically, I have to suppose that households (consumers) lose confidence and start saving more for any level of disposable income. Can you please answer the following question (using graphs too): How does the loss of consumer confidence affect production, investment andprivate savings? Does the attempt to save more necessarily lead to increased savings? Or will it lead to a decrease in savings?Suppose that a recession overseas causes foreigners to buy fewer goods from our country . Using IS - LM model for a close economy , answer the following questions : a . How does it affect IS curve and LM curve ? explain why ? b . What are the changes in total output , real interest rate , consumption , investment of the economy ? explain why ? c . Draw IS - LM graph to demonstrate your answer ?Assume the following IS-LM model:Expenditure sector: Money sector:C = 100 + (4/5)YD I = 300 - 20i M = 700G = 120 TA = (1/4)Y P = 2 YD = Y - TA NX = -20 Md = (1/3)Y + 200 - 10i a) Derive the IS and LM equations for the above model.b) Draw the IS and LM curves. What are the equilibrium values of output (Y) and interest rate(i)? Show these values on the graph you drew. Derive the equilibrium values of consumption (C) and money demand (Md).c) How much investment (I) will be crowded out if the government increases its purchases by ΔG = 160 and nominal money supply (M) remains unchanged? Show how this increase in government purchases would affect the graph in part (b) by drawing a new graph.
- I have to analyze, using the IS-LM model, the macroeconomiceffects of an increase in savings in the short term and its implications for long-term growth. Specifically, I have to suppose that households (consumers) lose confidence and start saving more for any level of disposable income. In terms of total savings and, therefore, of potential long-term growth, is a flat LM curve or a positive sloping LM curve better, in which investment was assumed to be exogenous?Analyze, using the IS-LM model, the macroeconomiceffects of an increase in savings in the short term and its implications for long-term growth. Specifically, suppose that households (consumers) lose confidence and start saving more for any level of disposable income. Question: In terms of total savings and, therefore, of potential long-term growth, is a flat LM curve or a positive sloping LM curve better?. Consider the following IS-LM model (all amounts are in millions of dollars): C = 50 + 0.6 YD T = 20 G = 300 I = 450 + 0.2 Y - 1500 i Derive the IS equation in the form Y = function (i, ….). The central bank sets an interest rate of 10%. What is the full SR model eqm Y? Use (M/P)d=3Y– 4000i to calculate what the real Ms is at this full SR eqm. Graph this eqm in 3 separate graphs: i-Y, i-(M/P), and Z-Y spaces. You may link these graphs up or leave them separate. Suppose Congress decides to decrease G from 300 to 295, cet. par. Provide a specific $ amount for the new eqm Y. Show this “shock,” with its appropriate name, in the 3 graphs of part b. above. Present and discuss all changes in all components of IS and LM using…