Using the IS-LM model, if money demand is sensitive to interest rates and investment is not directly sensitive to interest rates. Monetary policy is more effective than fiscal policy. Right or wrong? Prove it.
If given the following information (Unit: RM million): Savings (S) = -500 + 0.15Yd Investment (I) = 400 - 150r Government expenditure (G) = 500 Taxes (T) = 200 + 0.1Y Money supply (Ms ) = 5000 Transaction money demand ( 𝑀𝑡 𝑑 𝑃 )= 0.25Y Speculative money demand ( 𝑀𝑠 𝑑 𝑃 ) = 500-250r Price level (P) = 2
(a) Derive the functions of IS and LM in terms of interest rate (r) and income (Y). (b) Calculate the slope of the IS and LM curves. (c) Determine the equilibrium of interest rate and aggregate output in the economy. (d) If the autonomous consumption has increases to RM500 million, i. Calculate the new level of economic equilibrium. ii. Calculate the size of the horizontal and vertical movements that occur. iii. Sketch the changes that occurred before and after the increase in autonomous consumption and explain.
Current macro economic indicators of the country chosen, current or past economic crisis (hyperinflation, massive unemployment, currency depreciation etc) or a positive economic event( rapid GDP growth). Discuss how the country overcame the crisis
Problem 1. Suppose we have the following data about a simple economy:
C = 10 + 0.75Yd
I = 50
G = T = 20
(a) Find out the equilibrium level of national income.
(b) What is the size of the multiplier?
Using the World Bank’s World Development Indicators database, https://databank.worldbank.org/home.aspx, a) Complete the following table. 2006 2009 2014 2019* GDP per capita (current) Australia China India U.S. GDP growth rate Australia China India U.S. Inflation rate Australia China India U.S. *or latest available year b) Produce a plot for each variable (GDP, gdp growth, inflation) comparing the four countries. c) What can be inferred with respect to economic growth and price control in each of these economies?
Explain in detail the process of Monetary Policy transmission of an increase in the cash interest rate. Use relevant graphs to describe how a Central Bank’s action on the interest cash rate ripple through the economy and lead to the target policy goal. (Three connected diagrams should be used: (1) money supply and demand (2) investment demand schedule (3) AS/AD diagram. Interest rates is the variable that connects the first and second diagram).
Assume that an economy is initially operating at the natural rate of output (full employment output). Use the AD-AS model to illustrate graphically the effects on price and output of an increase in government spending and a decrease in the cash rate. Explain your assumptions with respect to the range of aggregate supply of your analysis.
a) Give the definition of GDP and explain what items are not included in its calculation? b) How is GDP calculated using the expenditure approach? c) How is GDP calculated using the income approach? d) Explain the problem of "double-counting" and how it can be avoided in calculating GDP
using the AD-AS curve. an increase in the price of imported crude oil will:
Using the AD-AS analysis. A rise in the repo rate will