Question

Based on the Aggregate Supply and Aggregate Demand model, and the IS-LM model, graphically illustrate and...

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.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

As a result of an increase in money supply, the LM curve shift rightwards to LM', intersecting the original IS curve at point E', with lower equilibrium interest rate and higher equilibrium output.

Corresponding to an increase in money supply and fall in interest rate, the Investment (I) in the economy increases. Since I is a component of Aggregate demand, the AD curve shifts rightwards to AD'. It intersects the new AS curve at E', with higher equilibrium price level and higher equilibrium output.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate...
Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate the current state of the aggregate economy in the United States. The graph needs to be clearly labeled and explained carefully. Make sure that the graph includes an aggregate demand (AD) curve, a short run aggregate supply (SRAS) curve, and a long run aggregate supply curve (LRAS, Potential GDP) curve.
Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate...
Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate the current state of the aggregate economy in the United States as of July 2020. The graph must be clearly labeled and explained carefully. Make sure that the graph includes an aggregate demand (AD) curve, a short run aggregate supply (SRAS) curve, and a long run aggregate supply curve (LRAS, Potential GDP) curve.
2. Aggregate demand a. Write down the AD relation. b. Use the IS-LM model to derive...
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...
Starting from long-run equilibrium, draw an aggregate demand-aggregate supply graph to illustrate the difference between a...
Starting from long-run equilibrium, draw an aggregate demand-aggregate supply graph to illustrate the difference between a long-run and a short-run equilibrium due to an increase in aggregate demand. Once the economy is in the short-run equilibrium, explain and graphically illustrate how long-run equilibrium will be restored.
Use the IS-LM model to graphically illustrate the impact of a sudden decrease in demand for...
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.
2018- 2019 Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that...
2018- 2019 Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate the current state of the aggregate economy in the United States. You should draw your own AD/AS graph which you can then scan and paste into your post. Your graph needs to be clearly labeled and explained carefully. Make sure that your graph includes an aggregate demand (AD) curve, a short run aggregate supply (SRAS) curve, and a long run aggregate supply...
Question 1: Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that...
Question 1: Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate the current state of the aggregate economy in the United States as of October 2020. The Aggregate Demand/Aggregate Supply Model is first introduced in Chapter 11 (Links to an external site.) of your text and is further explicated in Chapters 12 and 13. Make sure that you explain your graph in your own words.   You should draw your own AD/AS graph which...
Using the aggregate supply and demand model, illustrate what will happen in the short run and...
Using the aggregate supply and demand model, illustrate what will happen in the short run and long run when the economy suffers a supply shock.
Use the IS-LM-PC model to illustrate how the economy adjusts to an increase in taxes both...
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.
Using an aggregate supply and aggregate demand model illustrate and explain the effect of a significant...
Using an aggregate supply and aggregate demand model illustrate and explain the effect of a significant increase in technological innovation.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT