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Question Using the IS-LM model and assuming the central bank conducts monetary policy by manipulating the cash rate.TheExpansionary monetary policy designed to offset the impact of an exogenous decrease in export demand (assuming an unchanged fiscal policy).

Answer #1

Using the IS-LM model and assuming the central bank conducts
monetary policy by manipulating the cash rate, explain the effects
of:: Fiscal policy designed to offset the impact of a decrease in
the marginal propensity to consume (assuming an unchanged monetary
policy);

Use the IS-LM model to answer this question and assume that the
central bank controls the
interest rate. Suppose there is a simultaneous decrease in taxes
and decrease in interest rate.
a. Explain what effect this particular policy mix will have on
output and the money supply.
b. Based on your analysis, do we know with certainty what effect
this policy mix will have on
investment? Explain

Suppose that in a closed economy the fiscal policy is
contractionary and monetary policy is expansionary, and the central
bank is setting the interest rates (LM is horizontal). Graphically
analyze this policy mix by using IS-LM diagram. What will be the
impact on real income and on interest rate in the short run? What
will be the impact of this policy mix on the economy in the medium
run? Show by using an AD-AS-LRAS diagram.

Using the IS-LM-AD-AS model illustrate the
appropriate monetary-fiscal policy mix for an economy experiencing
a substantial fall in GDP, rising unemployment and a falling price
level.

Interest rates fall when
the central bank conducts contractionary monetary policy
an increase in savings increases the supply of loanable funds in
the economy
a new technology leads people to borrow more in order to invest
in the new technology
the central bank sells Treasury bills

6. Consider the IS-LM model. The central bank uses the interest
rate as its policy instrument. Illustrate and explain the impact of
the following shocks on the equilibrium values of real
income/output, money stock, consumption, and investment.
A. The non-bank private sector lowers its currency holdings.
B. Households increase autonomous saving
C. Default risk premium declines

According to the IS-LM model, which of the following statements
is true?
a.
Contractionary monetary policy tends to decrease GDP and
decrease the interest rate.
b.
An increase in government expenditure tends to increase GDP and
increase the interest rate.
c.
Expansionary monetary policy reduces the monetary base in the
economy.
d.
None of the above.

1) Suppose the central bank pursues restrictive monetary policy.
Then:
a. The IS curve shifts right
b. The IS curve shifts left
c. The LM curve shifts right
d. The LM curve shifts left
2. Which of the following would not cause the IS curve to shift
to the left?
a. a decrease in government expenditures
b. a decrease in the money supply
c. an increase in the domestic price level
d. an increase in taxes
3)Under fixed exchange rates,...

After the global Financial Crises most of the economies
implemented a fiscal and monetary policy mixes. Think about the big
contraction in output after the global financil crises.
a) Write down the monetary policy reaction by the Central Bank.
What would be the impact of this policy change on output and
inflation using AS-AD model.
b) Write down the fiscal policy reaction by the government. What
would be the impact of this policy change on output and inflation
using AS-AD...

Using the IS-LM model combined with the AD-AS model, show and
explain the effects in the SR and LR from a decrease in the money
supply - assuming nothing else exogenous changes. Be certain to
explain how and why variables change and include graphs.

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