4 in the islm and adas models what are the effects of

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4. In the IS/LM and AD/AS models, what are the effects of an increase in the money supply? Show graphically and explain. When is monetary policy more effective, when the LM curve is relatively flat, or when the LM curve is relatively steep? Explain. Md Ms* Ms’ Y* Y’ i* i’
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The increase in money supply will lead to an increase in LM and MS curve, and lead to the increase of real GDP and decrease of interest rate. As the picture shows the Steep LM would have bigger impact since the change in the Y and i will be larger than the change in the Flat LM. So the monetary policy would be more effective on a steep LM. 5. BOND SALE -- Series J LM* LM’ IS* Y Y’ Y* i’ i*
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Series J bonds are discount bonds with a face value of $30. They mature on January 27. 100 bonds will be sold using a Dutch Auction. As part of the problem set, please state your bid price and the quantity you would like to purchase of Series J bonds. You can spend as much as your portfolio is worth on January 26 to purchase Series J bonds, unless you can borrow from other students. Good luck! 19 dollars for 4 shares 19*4= $76
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