Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Question
Chapter 12, Problem 7PA
(a)
To determine
The impact of an increase in money supply in the short-run and in the long-run.
(b)
To determine
The impact of increase in government expenditures in the short-run and in the long-run.
(c)
To determine
The impact of increase in taxes in the short-run and in the long-run.
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Question: Consider an economy where the velocity of money is constant, and the economy is at full employment. If the central bank decides to increase the money supply by 5% but at the same time, the government imposes new taxes that effectively remove 5% of the consumers' disposable income, what would be the likely short-term effect on the nominal Gross Domestic Product (GDP) and the general price level? A) Nominal GDP remains unchanged; the general price level increases. B) Nominal GDP increases; the general price level remains unchanged. C) Nominal GDP remains unchanged; the general price level decreases. D) Nominal GDP increases; the general price level increases. Please don't use chatgpt it is giving wrong answer. Please try do it with yourself.
With the help of an IS-LM diagram, explain the effects of an expected future tax increase on current output, the current interest rate, current aggregate spending.
(It’s be better to explain with diagram, thank you!)
With the help of an IS-LM diagram, explain the effects of an increase in government spending on on current output, the current interest rate, current aggregate spending.
(It’d be better to explain it with diagram, thank you!)
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