HW_4_Questions.doc

# C c assume that the price level is fixed what happens

• Homework Help
• 1

This preview shows page 1. Sign up to view the full content.

c. C .Assume that the price level is fixed. What happens to the equilibrium interest rate if the supply of money is raised from 1,000 to 1,200? d. If the Fed wishes to raise the interest rate to 7 percent, what money supply should it set? Q3 . Use the Keynesian cross to predict the impact on output of a. An increase in government purchases. b. An increase in taxes. c. An equal increase in government purchases and taxes. Q4 . In the Keynesian cross, assume that the consumption function is given by ) ( 75 . 0 200 T Y C . Planned investment is 100; government purchases and taxes are both 100. a. Graph planned expenditure as a function of income. b. What is the equilibrium level of income? c. If government purchases increase to 125, what is the new equilibrium income? d. What level of government purchases is needed to achieve an income of 1,600? Q5 . Let’s examine how the goals of the Fed influence its response to shocks. Suppose Fed A cares only about keeping the price level stable, and Fed B cares only about keeping output and employment at their natural rates. Explain how each Fed would respond to a. An exogenous decrease in the velocity of money. b. An exogenous increase in the price of oil. Q6. Explain the impact of an increase in the money supply in the short run and in the long run
This is the end of the preview. Sign up to access the rest of the document.
• Summer '16
• nie wiem

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern