Question

Use the IS-LM-FE model to determine the effects of each of the following on the general equilibrium values of the real wage, employment, output, the real interest rate, consumption, investment, and the price level.

C. An influx of working age immigrants increases labor supply (ignore any other possible effects of the increased population

( my question is this, why should price level decrease? it says that for LM curve to shift down, price level should fall. but I wonder what makes price level go down? LM curve shift down as a result of decreases in price level. but what leads price level to decrease? im struggling with this so .please provide sufficent reason for it thanks )

Answer #1

The LM curve will shift down when the money supply increase, the new equilibrium will be at a higher money supply and lower interest rate.

LM curve will also shift down when the price level falls because a decrease in the price level will increase the real supply of money. For example, a good was available for $100 now it is available for just $50, rest $50 will increase the money supply or will be equivalent to an increased money supply.

An increased labor supply will decrease the wages and with lower wage the firm will be able to supply more at a the same price. That will increases the supply and shift the new equilibrium to the lower price and higher quantity.

Use the IS-LM-FE model to determine the effects of each of the
following on the general equilibrium values of the real wage,
employment, output, the real interest rate, consumption,
investment, and the price level.
d. The introduction of automated teller machines reduces the
demand for money.
(answer says that eventually, price level increases due to an
increase in the usage of ATMs thus, shifting LM curve to the left
and up )
My question is this, what is the relationship...

Use the IS-LM model to determine the effects of each of the
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b. Fiscal policy decisionmakers send out stimulus checks to most
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Use
the IS-LM model to determine the effects of each of the following
on the general equilibrium values of the real wage, employment,
output, the real interest rate, consumption, investment, and the
price level.
Draw
the diagrams for each.
(a)?Tougher immigration laws reduce the working-age
population.
(b)?There's increased volatility in the prices of stocks and
bonds.
(c)?The government tries to achieve tax equity by an increase in
the corporate tax rate.

1- In Keynes’s underemployment model with fixed money wages, if
there is an exogenous fall in investment, the economy will settle
at a lower price level leading to
a- a shift in the LM curve to the right and real wage to
rise.
b- a shift in the LM curve to the left and real wage to
fall.
c- a shift in the LM curve to the left and real wage to
rise.
d- a shift in the LM curve...

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responds to maintain a fixed ex-change rate.
A. Foreign income decreases.
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C. Private consumption increases exogenously..
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1. In the short-run IS-LM model with income taxation, taxes are
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?=0.2. Then, when ? decreases by 1000, then for any given interest
rate, the IS curve shifts:
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a. to the left by 1000.
b. to the right by 3000.
c. to the right by 3750
d. to the right by 1875.
2.
Suppose that the adult population in an economy is 28 million,...

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interest rates, average labor productivity, and the price
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2. Do these movements in part 1 correspond to the actual
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Use the AS/AD model to predict how each of the following shocks
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Explain very briefly if the following statements are true or
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Question 14.
In 2016, the U.S. trade deficit was
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Using to the aggregate-demand and
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