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Using IS-LM analysis, describe the likely effects of a tightening of both
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- Using IS-LM analysis, describe the likely effects of a tightening of both monetary policy and fiscal policyThe AS/AD (Aggregate Supply/Aggregate Demand) model is used for policymaking. Using the AS/AD model, graphically illustrate and describe the effect of an Expansionary Monetary Policy by the MPC (Monetary Policy Committee) by decreasing the repo rate.How does the decision to reduce the policy rate impact the economy. Explain using the ISLM model focusing on impacts on the goods and services market and the financial market.
- Using the IS-LM model, determine the impact on consumption (C), Investment (I), output (Y), i (nominal rate), and r (real rate) for each of the following (with graphs) A decrease in expected inflation. A decrease in expected inflation combined with a contractionary monetary policy.In the IS/LM model explain what happens to equilibrium output and interest rate if government simultaneously pursues expansionary fiscal policy and the central bank opts for a contradictionary monetary policy. Show with the help of a graph along with a very brief verbal explanation.True/False In the dynamic AS-AD model, a perfectly inelastic aggregate supply curve means the central bank cannot control the rate of output growth or the inflation rate.
- In the liquidity trap case where the LM schedule is nearly horizontal a. both monetary and fiscal policy are highly effective. b. monetary policy is ineffective and fiscal policy is effective. c. fiscal policy is ineffective and monetary policy is effective. d. monetary and fiscal policy are ineffective.In the IS-LM model, if there is expansionary fiscal policy and expansionary monetary policy at the same time, then output ____ and the interest rate ____..Show a liquidity trap equilibrium in an IS-LM diagram and an AS-AD diagram. Give an explanation for the slopes and positions of the curves in the diagram.
- Based on the IS-LM model, show the graph and explain the effects on the equilibrium levels of income and interest rate when the Central Bank purchases government securities from the public.Suppose the Government wishes to reduce the budget deficit by reducing public spending while holding taxes constant. Assuming that the monetary authorities hold the money supply constant, explain why the decrease in government spending affects output more in the IS model than in the IS-LM model. note: show diagrams pleaseUse the following versions of the IS-LM model to answer all sections: Question: c. determine the equilibrium value of Y, if M = 2,200, P = 1, and Yp = 4000 d. Based on the results of question point c, does the government budget experience a surplus, deficit, or balance?