C c assume that the price level is fixed what happens

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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
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