Consider the following IS-LM model C 198-040YD 145 0.15Y-837/ T= 190 ( = 0.05 G= 247...

 

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Consider the following IS-LM model C 198-040YD 145 0.15Y-837/ T= 190 ( = 0.05 G= 247 15Y-7,379 The IS equation is determined to be Y 1,300 30-2,325.00/ The LM equation is given as 0.05 MIP Furthermore, the equilibrium values of Y CL and the real money supply Y = 1,253 C-715 /201 M/P= 1,511 Suppose that government spending decreases to G-210 Determine the equation for the new IS relation Y-D- (Round your calculations of the constant and the slope term to two decimal places) Using the new /S equation following the decrease in government spending, calculate the new equilibriums values of the following Y- (Round your response to the nearest integer) (Round your response to the nearest integer) (Round your response to two decimal places 1 - All of the following statements accurately describe the outcome of a contractionary fiscal policy that involves a decrease in government spending except, OA. a decrease in government spending. G, always increases private investment, Z OB. a decrease in government spending decreases real output through the multiplier effect, which in tum decreases the real demand for money OC. the decrease in real output following a decrease in government spending may not necessanly decrease investment if the central bank pursues an expansionary policy OD. the decrease in real output and income following a decrease in government spending leads to a decrease in consumption, C With the government's contractionary fiscal policy, the value of the real money supply becomes (Round your response to the nearest integer) Now suppose the real money supply is fixed at 1511 and government spending still decreases to G=210. Calculate the new equilibrium values of the following Y- (Round your response to the nearest integer) C- - (Round your response to the nearest integer) - (Round your response to two decimal places) Hint: The money market must be in equilibrium so 1511 1.5Y - 7.379 and the goods market must be in equilibrium so Y CIG at the same values of Y and i Compare the two outcomes: When the real money supply is foxed and government spending decreases, the interest rate will have to decrease to % to keep the real money supply fixed. This results in investment and consumption relative to the case where the real money supply is allowed to adjust to maintain a fixed interest rate. (Round your response to two decimal places) Consider the following IS-LM model C 198-040YD 145 0.15Y-837/ T= 190 ( = 0.05 G= 247 15Y-7,379 The IS equation is determined to be Y 1,300 30-2,325.00/ The LM equation is given as 0.05 MIP Furthermore, the equilibrium values of Y CL and the real money supply Y = 1,253 C-715 /201 M/P= 1,511 Suppose that government spending decreases to G-210 Determine the equation for the new IS relation Y-D- (Round your calculations of the constant and the slope term to two decimal places) Using the new /S equation following the decrease in government spending, calculate the new equilibriums values of the following Y- (Round your response to the nearest integer) (Round your response to the nearest integer) (Round your response to two decimal places 1 - All of the following statements accurately describe the outcome of a contractionary fiscal policy that involves a decrease in government spending except, OA. a decrease in government spending. G, always increases private investment, Z OB. a decrease in government spending decreases real output through the multiplier effect, which in tum decreases the real demand for money OC. the decrease in real output following a decrease in government spending may not necessanly decrease investment if the central bank pursues an expansionary policy OD. the decrease in real output and income following a decrease in government spending leads to a decrease in consumption, C With the government's contractionary fiscal policy, the value of the real money supply becomes (Round your response to the nearest integer) Now suppose the real money supply is fixed at 1511 and government spending still decreases to G=210. Calculate the new equilibrium values of the following Y- (Round your response to the nearest integer) C- - (Round your response to the nearest integer) - (Round your response to two decimal places) Hint: The money market must be in equilibrium so 1511 1.5Y - 7.379 and the goods market must be in equilibrium so Y CIG at the same values of Y and i Compare the two outcomes: When the real money supply is foxed and government spending decreases, the interest rate will have to decrease to % to keep the real money supply fixed. This results in investment and consumption relative to the case where the real money supply is allowed to adjust to maintain a fixed interest rate. (Round your response to two decimal places)

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To calculate the new equilibrium values following the decrease in government spending G210 we need to first find the new equation for the relationship ... View the full answer