Use the IS-LM diagram to analyze the following questions. Be sure to label: i. the axes,...
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Use the IS-LM diagram to analyze the following questions. Be sure to label: i. the axes, ii. the curves, iii. the initial equilibrium values, iv. the direction the curves shift, v. the terminal equilibrium values. a. (8 points) Use the IS-LM graphs to illustrate graphically the short-run impact on output and interest rates of a one-time increase in the price level due to a large increase in oil prices. Explain your answer in words briefly. b. (8 points) How can the Bank of Canada keep the economy from falling into a recession if the budget deficit is reduced? Use the IS-LM graphs to illustrate graphically the impact of both the fiscal policy reducing the deficit and the monetary policy, which prevents output from falling. Explain your answer in words briefly. Use the IS-LM diagram to analyze the following questions. Be sure to label: i. the axes, ii. the curves, iii. the initial equilibrium values, iv. the direction the curves shift, v. the terminal equilibrium values. a. (8 points) Use the IS-LM graphs to illustrate graphically the short-run impact on output and interest rates of a one-time increase in the price level due to a large increase in oil prices. Explain your answer in words briefly. b. (8 points) How can the Bank of Canada keep the economy from falling into a recession if the budget deficit is reduced? Use the IS-LM graphs to illustrate graphically the impact of both the fiscal policy reducing the deficit and the monetary policy, which prevents output from falling. Explain your answer in words briefly.
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Macroeconomics
ISBN: 978-1464168505
5th Canadian Edition
Authors: N. Gregory Mankiw, William M. Scarth
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