Reference no: EM13891976
Consider the economy of Hicksonia.
A. The consumption function is given by C = 300 + 0.6(Y-T)
Investment function is I = 700 - 80r
Government purchases and taxes are both 500. For this economy, graph the IS curve for r ranging from 0 to 8.
B. The money demand function in Hicksonia is (M/P)^d = Y - 200r
The money supply M is 3000 and the price level P is 3. Graph the LM curve for r ranging from 0 to 8
C. Find the equilibrium interest rate r and the equilibrium level of income Y.
D. Suppose the government purchases are raised from 500 to 700. How much does the IS curve shift? What are the new equilibrium interest rate and level of income?
E. Suppose instead that the money supply is raised from 3000 to 4500. How much does the LM curve shift? What are the new equilibrium interest rate and level of income?
F. With the initial values for monetary and fiscal policy, suppose that the price level rises from 3 to 5. What happens? What are the new equilibrium interest rate and level of income?
G. For the initial value of monetary and fiscal policy, Derive and graph an equation for the aggregate demand curve. What happens to this aggregate demand curve if fiscal or monetary policy changes, as in parts (d) and (e)?
Manage wine cellar with fixed storage space
: Suppose you manage a wine cellar with fixed storage space and you have to choose when to sell each bottle of wine. The value of each bottle V(t) is increasing over time at a decreasing rate: V' (t) > 0 and V'' (t)
|
Bonds from financial institutions
: Suppose the Fed buys $100 billion in bonds from financial institutions. What effect will this bond purchase have on the money supply if the currency/deposit ratio is .15, the excess reserve ratio is .09, and the required reserve ratio is .06?
|
Receives utility from two goods
: Jane receives utility from two goods, goat’s milk (m) and strudel (s), according to the utility function: Show that increases in the price of goat’s milk will not affect the quantity of strudel that Jane buys; that is show: ∂s/∂pm = 0.
|
What are new equilibrium interest rate and level of income
: Derive and graph the IS curve and the LM curve. Calculate the equilibrium interest rate and level of income. Label that point A on your graph. Suppose that a newly elected president cuts taxes by 20%. Assuming the money supply is held constant. what ..
|
Consider the economy of hicksonia
: Consider the economy of Hicksonia. The money demand function in Hicksonia is (M/P)^d = Y - 200r. The money supply M is 3000 and the price level P is 3. Graph the LM curve for r ranging from 0 to 8. Find the equilibrium interest rate r and the equilib..
|
How has the media influenced your cultural identity
: How has the media influenced your cultural identity? Your religion? Your community? What other forces operate to influence your cultural identity?
|
Use the empirical rule for normal distributions
: The average rent in a city is $1,500 per month with a standard deviation of $250. Assume rent follows the normal distribution. What percentage of rents are between $1,250 and $1,750? What percentage of rents are greater than $2,000?
|
Is the economy in its long-term equilibrium
: Suppose the parameters of the IS curve are a ¯i = 0, b ¯ = 0.5, r ¯ = 3% and the real interest rate is initially R = 3%. Is the economy in its long-term equilibrium? Explain.
|
Liabilities plus coins issued-treasury make up monetary base
: The? Fed's liabilities plus coins issued by the Treasury make up the monetary base. ?Coins, which are issued by the Treasury are an asset of the Fed and a component of the monetary base. The monetary base is the sum of Federal Reserve? notes, coins, ..
|