Question

Use the IS-LM-PC model to illustrate how the economy adjusts to an increase in taxes both in the short run and in the medium run.

Answer #1

Based on the Aggregate Supply and Aggregate Demand model, and
the IS-LM model, graphically illustrate and explain what effect an
increase in the money supply will have on the economy. In your
graphs, clearly illustrate the short-run and medium-run
equilibria.
Draw both the IS-LM and the AD-AS models.

The
IS-LM-PC Model, show what happens in the short run and medium run
with a change in taxes

4.
a. Use the IS-LM-PC model to illustrate an economy experiencing
zero lower bound and operating below the natural rate of
output.
b. Explain and illustrate why expansionary monetary policy may
not help to raise the output level to the natural rate.
c. Offer two alternative policies that would work to reduce
unemployment under these circumstances. Explain and illustrate your
answers.

Use the IS-LM model to graphically illustrate the impact of a
sudden decrease in demand for money (due to an increase in the use
of internet banking) on the output and interest rate in an economy
in the short run. Write down the impact on Y, C, U and
I.
Be sure to label: i. the axes; ii. the curves; iii. the initial
equilibrium levels; iv. the direction the curves shift; and v. the
new short-run equilibrium.

Consider a closed-economy IS-LM model. Assume
initially the economy is at medium run
equilibrium. Discuss with the help of graphs the effects
of a decrease in consumer sentiment for output, interest
rates and price level in the short run as well as in the
medium run. Be sure to explain how the economy transitions from
short run to the medium run.

Use the IS-LM model to graphically illustrate the impact of a
housing crash on output and interest rate in an economy in the
short run. Be sure to label: i. the axes; ii. the curves; iii. the
initial equilibrium levels; iv. the direction the curves shift; and
v. the new short-run equilibrium. And Write down all changes from
the initial equilibrium (the changes in C, I, r, u and Y) to the
new short-run equilibrium.

Use the IS-LM model to predict the effect of an increase in the
money supply on output, Y , and the real interest rate, r in the
short-run.
What is the effect of this policy on these variables in the
long-run? How do you know?

3. In the IS-LM model, explain how does an increase in taxes
affect equilibrium in-come. If you use any diagram, label your axes
and curve clearly

Graph the effects of oil price increase in the IS-LM-PC model.
Explain, in words, whathappens to unemployment and inflation?

2. Aggregate demand
a. Write down the AD relation.
b. Use the IS-LM model to derive the AD curve. What could cause
the shift of AD curve?
3. Monetary expansion
a. Assume the economy is initially at Yn. Draw the AD-AS model
and label the initial equilibrium as A. Draw the corresponding
IS-LM model and indicate the equilibrium A.
b. Suppose now there is a monetary expansion. Show the short run
effect on price level, output, and interest rate in...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 5 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago

asked 4 hours ago

asked 4 hours ago

asked 4 hours ago