One policy response to the economie slowdown in Canada in 2008-2009 wan to increase money growth. This policy response can be represented in the IS-LM model by shifting the IS, right curve to the LM, right LM, left 2S; left
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- The US Government is facing major budget deficit deciding between implementing fiscal and monetary policy to boost output back to potential output. In the presence of expectations, using the IS-LM model graph the effects on the US economy from a contractionary fiscal policy? What would happen if this change is perceived as permanent by investors? Graph and explain. What would happen if the government was perceived as wasteful? Graph and explain.Urgentttt!!! Use the IS-LM model to answer this question. Suppose there is a simultaneous increase in government spending and reduction in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix will have on investment? Explain.Explain the IS LM model for reduced policy rate in goods and services market and finincal market
- Discuss in detail the limitations of the IS-LM model. Why is it unrealistic for todays economiesIf the level of government spending were to increase by If the level of government spending were to increase by 50 units in the IS-LM schedule model, how would this affect the position of the IS schedule? In which direction would the schedule shift and by how many units? If the level of government spending were to increase byUse the IS-LM model to answer this question. Suppose there is a simultaneous increase in government spending and reduction in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix will have on investment? Explain.
- Consider a closed economy, Lone. To tackle the severe recession, hergovernment conducts a tax rebate to the households. Assume that the central bank is independent on the government decision. Use the IS-LM model to explain how this government act affects the interest rate, investment and income of Lone. Evaluate the effectiveness of the above policy in tacking the recession if investment demand in Lone is interest elastic. Explain in words.Consider the ASAD model of a closed economy with zero ongoing inflation in the medium run. The aggregate demand curve is determined by the IS-LM model. The aggregate supply curve is derived from the imperfect competition model of the labour market (the WS-PS model where firms have perfect foresight, monopoly power, and use a linear technology with constant returns to labour; workers expect zero inflation in every period, and their wage requests are an increasing function of wage-push factors like unions' bargaining power). The economy is initially in the potential equilibrium. Assume a permanent increase in the bargaining power of unions. Fiscal and monetary authorities perfectly forecast this shock and decide to neutralize immediately its consequences for the price level by enacting a “policy of price stability” that successfully eliminates all fluctuations in the general price level in every period. Therefore, the economy is subject to two simultaneous shocks – the increase in…Consider the ASAD model of a closed economy with zero ongoing inflation in the medium run. The aggregate demand curve is determined by the IS-LM model. The aggregate supply curve is derived from the imperfect competition model of the labour market (the WS-PS model where firms have perfect foresight, monopoly power, and use a linear technology with constant returns to labour; workers expect zero inflation in every period, and their wage requests are an increasing function of wage-push factors like unions' bargaining power). The economy is initially in the potential equilibrium. Assume a permanent increase in the bargaining power of unions. Fiscal and monetary authorities perfectly forecast this shock and decide to neutralize immediately its consequences for the price level by enacting a “policy of price stability” that successfully eliminates all fluctuations in the general price level in every period. Therefore, the economy is subject to two simultaneous shocks – the increase in…
- Using the AS-AD model, graph and explain the effects of Covid-19 on the U.S. macroeconomy by comparing 2019 vs. 2020. Label the years on all curves, the axis, and the equilibrium. Ignore macroeconomic policy responses, such as the CARES act. Which curves shifted which direction, and why?D7) IS-LM Model: Based on your understanding of the IS-LM model, graphically illustrate and explain what effect a monetary expansion will have on output, the interest rate, and investment. ( Properly)Which is not a dynamic of IS-LM Model • it takes some time an output to adjust to the new fiscal and monetary policies • It takes some time for consumption spending to adjust changes in disposable income • It will take time for an investment spending adjust to changes in interest rate • it will take some tome for a policy to change in order to adjust output