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a. Suppose the economy begins with output equal to its natural level. Then, there is a reduction in income taxes. Using the AS–AD model developed in this chapter, show the effects of a reduction in income taxes on the position of the AD, AS, IS, and LM curves. b. Assume that the economy starts at the natural level of output. Now suppose there is a decline in business confidence, so that investment demand falls for any interest rate. In an AS–AD diagram, show what happens to output and the price level in the short run and the medium run. c. Suppose that the Federal Reserve decides to respond im-mediately to the decline in business confidence in the short run. In particular, suppose that the Fed wants to prevent the unemployment rate from changing in the short run after the decline in business confidence. What should the Fed do? Show how the Fed’s action, combined with the decline in business confidence, affects the AS–AD diagram in the short run and the medium run.
Describe how each of these activities affects government households as well as businesses.
Suppose the money supply in country X is 25000 and nominal GDP is 89500. Calculate the velocity of money and enter it below. Round your answer to the nearest hundredth.
The 2001 recession ended in November 2001, but the perception of "bad economic times" lingered into 2002 and 2003. What evidence do these graphs provide concerning the lingering perception of a recession.
Welfare recipients would rather receive cash benefits than in-kind benefits, (medical care, housing assistance, food stamps), but much of the welfare system provides in-kind benefits. Is there a reason for not giving recipients their welfare benefits..
If prices are rising and a company’s inventory levels are unchanged, the use of fifo rather than lifo for inventory valuation will tend to result in the current period in a: higher income tax expense, b: lower gross profit percentage, c: lower ending..
The government is contemplating to implement actions to prevent climate change. If no action is taken then climate change will happen with a probability of 20%. There is a probability of 100-20 that there will be no climate change. We will not be abl..
Explain how Ibn Khaldoun view traders, including types of traders, the importance of traders to the economy, the necessary skills for successful traders, and role of connections in a trader’s success.
Identify one positive or negative supply shock in the last decade and what is the impact that the shock has had in our economy.
Assume the world has only the U.S. and Germany, and that trade between them is balanced such that neither runs a trade deficit nor surplus. If exchange rates now change such that the U.S. dollar becomes more expensive for Germans to buy (and all else..
You are told that the present worth of an increasing geometric gradient is $88,146. If the cash flow in year 1 is $25,000 and the gradient increase is 18% per year, what is the value of n? The interest rate is 10%per year.
Assume that you are going to start a small business of your own. Describe the business and, utilizing the concepts of this unit and the earlier units, discuss: What costs you would incur;
Charles' utility function is U(x;y)=xy. Anne's utility function is U(x;y)=1000xy. Diana's utility function is xy. Elizabeth's utility function is U(x; y)=-1/(xy+1).Fergie' s utility function is xy-10000. Margaret's utility function is x/y. Philip's u..
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