Question 8 (1 point) Saved Consider a Phillips curve of the form @ = 7, B(u v") +v An increase in v represents: O a) an unfavourable supply shock. @ b) a favourable demand shock. O c) a favourable supply shock. O d) an unfavourable demand shock. Consider a short-run closed economy IS-LM model where the aggregate demand equation is given by Y% = 1500 + ((600)/P) Suppose that the aggregate supply equation is YS = 1_' + P EP) where Y =1440, EP=60 , and where & =3. In equilibrium, Y =Y % Then the equilibrium price in this economy will be approximately ___ over time, the aggregate supply curve willshift ______ to attain long- run equilibrium. (Hint: You should get a (simple) quadratic equation in P that you need to solve for P.) . Therefore, () a) P* = 68.5; to the right () b) P* = 82.43: to the left () ) P* = 55.4: to the left (O d) P* = 48.2; to the right Consider the following short-run closed economy /S-LM model described by equations (1) through (6): (1) C = 600 + 0.9(Y - T); (2) T = 150+0.25Y:(3) G = 700; (4) 1=800-40r;(5)Y=C+1+G;(6) M/P=0.5Y - 50r where the nominal money supply M=2000 and the price level is P = 1. Equation (5) is the goods market equilibrium condition (IS equation), while equation (6) is the money market equilibrium condition (LM equation). Solving for the equilibrium value of Y* yields (approximately): () a) Y*=4919 b) Y*=6950.3 () Y*=5480 () d) Y*=3450.5 Consider the following short-run closed economy /S-LM model described by equations (1) through (6): (1) C = 600 + 0.9(Y - T); (2) T = 150+0.25Y:(3) G = 700; (4) =800 -40r;(5)Y=C+1+G;(6) M/P=0.5Y - 50r where the nominal money supply M=2000 and the price level is P = 1. Equation (5) is the goods market equilibrium condition (IS equation), while equation (6) is the money market equilibrium condition (LM equation). Solving for the equilibrium value of r* yields (approximately) ) a) r*=10.45 (O b) r*=7.57 () r*=9.19 O d) r=4.6 Question 45 (6 points) Consider the following short-run closed economy /S-LM model described by equations (1) through (6): (1) C = 600 + 0.9(Y - T); (2) T = 150+0.25Y;(3) G = 700; (4) 1=800-40r;(5)Y=C+1+G;(6) M/P=0.5Y - 50r where the nominal money supply M=2000 and the price level is P = 1. Equation (5) is the goods market equilibrium condition (IS equation), while equation (6) is the money market equilibrium condition (LM equation). Suppose that the government grants an investment tax credit to firms to stimulate investment so that |_bar (the fixed component of investment) increases from 800 to 900 units. If the Bank of Canada uses monetary policy to maintain the interest rate constant, then this increase in |_bar will cause O a) an increase in equilibrium output by 523 units but will leave the money supply unchanged. O b) an increase in the equilibrium output level by 453 units and a decrease in the money supply by 125 units. Q b) an increase in the equilibrium output level by 453 units and a decrease in the money supply by 125 units. Q ) anincrease in equilibrium output by 308 units and an increase the money supply by 154 units. Q d) the equilibrium output to remain the same, but the money supply to increase by 100 units