Hey Tutors! Would love to get your opinion on what the answers are for the following homework! Quite desperate for some help -

Part One:

Question 1: Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate (on the vertical axis). This money demand curve will shift to the right when which of the following occurs?

a. an increase in income.

b. a reduction in the interest rate.

c. an increase in the money supply.

d. a decrease in the money supply.

Question 2: At the current interest rate, suppose the supply of money is less than the demand for money.Given this information, we know that:

a. the price of bonds will tend to increase.

b. the price of bonds will tend to fall.

c. the goods market is in equilibrium.

d. the supply of bonds equals the demand for bonds.

Question 3: In the IS/LM model presented in lectures, suppose that investment spending depends only on the interest rate (an increase in the interest rate lowers investment demand). Given this information, an increase in taxes:

a. will cause investment to decrease.

b. will cause investment to increase.

c. may cause investment to increase or to decrease.

d. will have no effect on output.

Question 4: In the IS/LM model presented in lectures, suppose the government simultaneously reduces the money supply and cuts taxes. We know with certainty that this combination of policies must cause:

a.an increase in the interest rate

b.a reduction in the interest rate

c.an increase in output

d.a reduction in output

Question 5:In the IS/LM model presented in lectures, suppose that the aggregate demand for goods does not depend on the interest rate. A reduction in the money supply will cause which of the following for this economy?

a.no change in the interest rate

b.no change in output

c.a reduction in investment

d.an increase in investment

Part Two:

The wage setting relation W = PF(u, z) developed in lectures and in Blanchard, for the situation where P = P^e, can be drawn in real wage/unemployment space as follows:

(Refer to Photo)