Question: Explain the IS-LM model.Using the model explain the effect of an increase in government purchases. Starting from the initial equilibrium, suppose the Fed unexpectedly decreases

Explain the IS-LM model.Using the model explain the effect of an increase in government purchases.

Starting from the initial equilibrium, suppose the Fed unexpectedly decreases the money supply by 10%. Describe what happens to the following variables both in the short-run and in the long-run : (i) output (Y) (ii) employment (N) (iii) expected real interest rate (r) (iv) price level (P) (v) real wages (W/P)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

1.Suppose that the trade off between unemployment and inflations is determined by the Philips curve: 1 =u" -a(x-*') Where u denotes the unemployment rate a" un the natural rate, # the rate of...

Explain in details Problem 10.5. Suppose that the money demand function is: = Y -100. r, where r is the nominal interest rate=real interest rate in percent. Let Y=1000, and M=1000, and P=2. A. Graph...

Macroeconomics. Please help !!! Thank you 10 . Use of discretionary policy to stabilize the economy Should the government use monetary and fiscal policy in an effort to stabilize the economy? The...

Analyse the following questions and give clear analysis f. According to the Mundell-Fleming Model, monetary policy is more effective under a floating exchange rate than under a pegged exchange rate....

1. Assume that the stock market experiences a massive rally, leading to a significant increase in household wealth. Analyze the effects of this increase in household wealth: a. On employment and the...

I need help with this. don't take long please and thank you! 5. Fiscal policy, the money market, and aggregate demand Suppose there is some hypothetical economy in which households spend $0.50 of...

C orrec tl y an s w er a llq u es t i o n s . Draw a correctly labeled graph of long-run aggregate supply, short-run aggregate supply, and aggregate demand, AND show each of the following for an...

He lp m e w or k o u tt h e f o ll o w in g q u es t i o n s : Questions. Exercise 6.7 The distinction between autonomous and induced expenditure is important for the determination of equilibrium...

One. Consider a two-period small open economy populated by a large number of identical households with preferences described by the utility function lnCT 1 + lnCN 1 + lnCT 2 + lnCN 2 where CT 1 and...

Hello! Need help with the MCQ Questions Page 371, Questions 1 - 25. Please, list the letter that best answers the question AND give a brief explanation as to why. Explanations can include...

Starting with an alkene, indicate how each of the following compounds can be synthesized: a. b. c. d. e. f. CH3CHOCH3 Br CHCH2HCHCH3 Br CH2OH CH3o CH3 Br CH3 OCH-CH-CH,

The records at the end of January 2012 for All Star Company showed the following for a particular kind of merchandise: Inventory, December 31, 2011 at FIFO 19 Units @ $16 = $304 Inventory, December...

Delores is a financial accoumtant One of her roles is to Multiple Choice manage and control invertory and production costs. analyee the costs of production and marketing. prepare and monitor...

Walt Disney Company is famed for its creativity, strong global brand, and uncanny ability to take service and experience businesses to higher levels. In the early 1990s, then-CEO Michael Eisner...

2. In this chapter, the reader should reflect on the following concepts: Patterns, symmetrical relationships, complementary relationships.

1. To provide insight into how setting an overly narrow boundary can give a mes-sage a specific meaning, while setting a wider boundary can give a completely different meaning.

12. What is meant by the statement, often we do not know what the real problem is until we look at its possible consequences or solutions?.