Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the following IS-LM model: C = 218+0.46YD T= 264 / = 158 +0.21Y - 1,132/ i= 0.04 G = 330 MIP = 2.1 Y

image text in transcribedimage text in transcribed

image text in transcribedimage text in transcribed
Consider the following IS-LM model: C = 218+0.46YD T= 264 / = 158 +0.21Y - 1,132/ i= 0.04 G = 330 MIP = 2.1 Y -8,090/ The /S equation is determined to be Y = 1771.39- 3430.30i. The LM equation is given as i = 0.04 Initial equilibrium values of Y, C, /, and the real money supply are calculated as Y = 1,634 C = 848 / = 456 M/P = 3,108 Now suppose that the central bank cuts the interest rate to 2%. In a graph of the /S-LM model, this causes the LM curve to shift downward . Following the change in the interest rate to 2%, the value of equilibrium real output becomes 1703 . (Round your response to the nearest integer.) Following the change in the interest rate to 2%, the values of the new equilibrium C and / are: C = 880 . (Round your responses to the nearest integer.) /= 493 . (Round your responses to the nearest integer.)Which of the following statements is not consistent with the effects of an expansionary monetary policy? As the interest rate falls, O A. the real demand for money rises. B. equilibrium investment may increase, decrease, or remain unchanged. O C. equilibrium consumption increases. O D. the money supply increases and equilibrium real output increases. With the central bank's expansionary monetary policy, the value of the real money supply becomes . (Round your response to the nearest integer.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Leading Strategic Change In An Era Of Healthcare Transformation

Authors: Jim Austin ,Judith Bentkover ,Laurence Chait

1st Edition

3319808826, 978-3319808826

Students also viewed these Economics questions