Q: A small open economy is described by the following equations:
A small open economy is described by the following equations: C =50 +.75(Y - T ) I = 200 - 20r NX = 200 - 50Ɛ M/P = Y - 40r G = 200 T = 200 M = 3000 P = 3 r* = 5 a. Derive and graph the IS* and LM* cu...
See AnswerQ: In the Mundell–Fleming model with floating exchange rates, explain
In the Mundell–Fleming model with floating exchange rates, explain what happens to aggregate income, the exchange rate, and the trade balance when the money supply is reduced. What would happen if exc...
See AnswerQ: Suppose that an economy has the Phillips curve π = π
Suppose that an economy has the Phillips curve π = π -1 - 0.5(u - 5). a. What is the natural rate of unemployment? b. Graph the short-run and long-run relationships between inflation and unemployment...
See AnswerQ: How is the Phillips curve related to aggregate supply?
How is the Phillips curve related to aggregate supply?
See AnswerQ: Suppose the monetary-policy rule has the wrong natural rate of
Suppose the monetary-policy rule has the wrong natural rate of interest. That is, the central bank follows this rule: where p’ does not equal r, the natural rate of interest in the...
See AnswerQ: On a carefully labeled graph, draw the dynamic aggregate demand curve
On a carefully labeled graph, draw the dynamic aggregate demand curve. Explain why it has the slope it has.
See AnswerQ: Gabe and Gita both obey the two-period Fisher model of
Gabe and Gita both obey the two-period Fisher model of consumption. Gabe earns $100 in the first period and $100 in the second period. Gita earns nothing in the first period and $210 in the second per...
See AnswerQ: In the Cagan model, if the money supply is expected to
In the Cagan model, if the money supply is expected to grow at some constant rate µ (so that Emt+s = mt + sµ), then Equation A9 can be shown to imply that pt = mt + ÿµ. a. Interpret this result. b. Wh...
See AnswerQ: Describe the evidence that was consistent with Keynes’s conjectures and the evidence
Describe the evidence that was consistent with Keynes’s conjectures and the evidence that was inconsistent with them.
See AnswerQ: Suppose that the government levies a tax on oil companies equal to
Suppose that the government levies a tax on oil companies equal to a proportion of the value of the company’s oil reserves. (The government assures the firms that the tax is for one time only.) Accord...
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