Illustrate what policy options are available to governmet

Assignment Help Macroeconomics
Reference no: EM1334882

Housing and GDP

New federal housing data shows that the nation's most overheated local housing markets make up such a large share of the total US market that a sharp fall in their value could stall or slow economic growth. If worst case is true, and a sharp fall in real estate values leads to a decline in GDP, assess:

1. how this situation would be depicted using an IS-LM diagram where the equilibrium and interest rate before the fall in real estate values are Y0 and r0 (Y subzero and r subzero for income and interest rates). Include/show any new equilibrium values.

2. how could a sharp fall in real estate values affect the GDP?

Now assume that even after a fall in real estate values and decline in GPS, the fed continues with its interest rate increase campaign and increases the federal funds target rate:

3. using the same IS-LM diagram from 1, show this new situation depicted.

Now suppose the fed decides not to change the federal funds target rate after the fall in real estate values and decline in GDP:

4. what policy options are available to the government to counter the effect of a sharp fall in real estate values on the economy? Again, using the same IS-LM diagram from 1, show the effect of these policy options.

5. would these policy options affect the government budget deficit? How?


Reference no: EM1334882


Write a Review


Macroeconomics Questions & Answers

  Transaction of a buyer also seller directly affect a party

Does the transaction of a buyer also seller directly affect a third party. Is the effect a negative or positive externality.

  Calculation of expected utility-maximum amount of insurance

Ms. Fogg is planning a trip where she plans to spend $10,000-What is the maximum amount that Ms. Fogg is willing to pay to insure the $1,000?

  Law of increasing opportunity costs-production possibilities

Show such data graphically. Upon what specific assumptions is this production possibilities curve based? If the economy is at point C, what is the cost of one more automobile? Of one more forklift? Describe how the production possibi..

  Marshallia and hicksian demand functions

Use the utility function to answer the questions, below: (x1, x2) = exp (√(x 1 ) + √(x 2 )-Derive the Marshallian (ordinary) demand function for good1 and 2, x i *(p,l), i =1,2 . Then derive the indirect utility function (p,l).

  Determine elasticity of demand-revenue maximizing price

Show the area on the graph that would correspond to consumer's surplus earned by the typical boarder/skier with this payment scheme. Explain your answer briefly.

  Joining marketsplace or developing countries across world

Joining marketsplace or developing countries across the world has presented attractive opportunities to global companies and thus, boosted FDI.

  Graphical representation of long run average supply

There are many factors might change AD and AS, and equilibrium. Please evaluate the effect of following scenario on the AD curve, AS curve, and accordingly the effect on equilibrium price level and equilibrium GDP/output.

  Calculating gdp and ni

The following is a list of figures for a given year in billions of dollars. Calculate the GDP and NI.

  Solution for maximization problem by using excel solver

Bright Future, Ltd (BF) is a non-profit foundation providing medical treatment to emotionally distressed children. Determine the optimal amount of service provided by BF.

  Elucidate what would the elasticity of supply

Elucidate what would the elasticity of supply have to be for a food stamp program to increase the availability of food to the poor with no prices increase.

  Algebraically find the equilibrium price output combination

Lawn mowing services are supplied by a host of individuals in the suburb of Westbrook. Demand and supply conditions in the perfectly competitive domestic for lawn mowing services are:

  Effective rate of protection for widgets prodcution

Suppose you want to produce WIDGETS in your country. The international price of an imported WIDGET is $50 and pays an import tariff of $10 per unit. Three inputs are needed to produce a WIDGET.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd