Intermediate Macroeconomic Theory II, Fall 2006 Solutions to Problem Set 4 (35 points)
|
|
- Mitchell Phelps
- 5 years ago
- Views:
Transcription
1 Intermediate Macroeconomic Theory II, Fall 2006 Solutions to Problem Set 4 (35 points) 1. (16 points) For all of the questions below, draw the relevant curves. (a) (2 points) Suppose that the government wants to raise investment but keep output constant. Using the IS LM model, what mix of monetary and fiscal policy would achieve this goal? (b) (2 points) Two classical economies differ only in one respect: in economy A money growth and inflation have been low and stable for many years, but in economy B, money growth and inflation have fluctuated erratically between very low and very high levels. When producers in economy B observe changes in the prices of the goods they produce, from past experience they usually attribute these changes to fluctuations in the overall price level, rather than to changes in the relative prices of their goods. Will the slope of the SRAS for economy B be flatter or steeper than the slope of the curve for economy A? What about the slope of the Phillips curve? (Hint: draw supply curves and convince yourself that your answer is right.) Use the IS LM model to determine the short run and long run effects of each of the following on the output (real income), the real interest rate, consumption, investment, the price level, and the real money balances. Draw the relevant diagrams to show how you arrived at your answer. Assume that consumption is not responsive to changes in the real interest rate; and that the economy is initially at the natural level of output. Track the effects for normal cases, i.e., do not bother about vertical/horizontal IS/LM curves. (c) (4 points) The expected rate of inflation rises. (d) (4 points) The introduction of automatic teller machines reduces the demand for money. (e) (4 points) An increase in consumer confidence, as consumers expect their incomes to be higher in the future. (a) To raise investment, we need to reduce the real interest rate. Thus, we need to adopt a policy that shifts the LM curve to the right, i.e., to pursue an expansionary, loose, monetary policy. For a stable IS curve this will translate into a lower real interest rate, higher investment, and higher output. To maintain output at its previous level, we need to contract spending in the economy and move the IS curve to the left this can be achieved, say, by a decrease in government expenditures. Thus, a loose monetary policy and a tight fiscal policy would produce the desired outcome. 1
2 (b) The slope of the SRAS curve will be much steeper in the economy B, because producers increase their output only by a small amount in response to an increase in price. The economy A s SRAS curve will be flatter, as people are likely to perceive own price changes as changes in the relative prices rather than in the aggregate price level, and thus will respond more strongly to changes in own prices. The short-run Phillips curve will also be steeper in economy B, since unemployment, like output, will not respond much to a change in inflation. In economy A, where (un-)employment and output respond more strongly to the price changes, the short-run Phillips curve will be flatter. (c) (d) Reduction in the money demand shifts the LM curve to the right for a given output, price and money supply, we will have a lower real interest rate. Since the IS is stable, the real interest rate falls, the investment increases, and the national income increases. Compared to the initial equilibrium, in the SR: Y, I, r, C (since the real income increases), P, M/P. In the long run, the price level increases in response to an increase in expenditures, M/P falls, and the LM shifts to the left, back to where it was initially. The real interest rate increases 2
3 to its original level, investment falls and output reverts to its natural level. Compared to the initial equilibrium, in the LR: Y, I, r, C, P, M/P. (e) An increase in consumer confidence raises planned expenditures and therefore shifts the IS curve to the right, leading to an increase in the real interest rate, and the fall in investment. Compared to the initial equilibrium, in the SR: Y, I, r, C, P, M/P. In the long run, the price level increases, M/P falls and the LM shifts to the left, increasing the real interest rate and depressing investment even further. Compared to the initial equilibrium, in the LR: Y, I, r, C (since autonomous consumption increases for any level of income), P, M/P. 2. (14 points) Consider the following economy: Planned consumption: C = 1, (Y T ) 200 r. Planned investment: I = r. Real money demand: (M/P ) d = 0.5 Y 200 i. 3
4 Expected inflation: π e = 0. (a) (2 points) Suppose T = G = 450 and M = 9, 000. Find an equation for the IS curve. (Hint: Set the national savings to be equal to the national investment, and solve for the relationship between r and Y, given P. Express the IS curve as Y being a function of r.) (b) (2 points) Find an equation for the LM curve. (Hint: Set real money supply and real money demand equal, and solve for the relationship between r and Y, for a given P. Express the LM curve as Y being a function of r.) (c) (2 points) Find an equation for the aggregate demand curve. (Hint: Use the IS and LM equations to find a relationship between Y and P. Express the AD curve as Y being a function of P.) (d) (2 points) If the full employment output Y = 4, 600, what are the equilibrium values for the level of aggregate prices, output, consumption, investment, and the real interest rate? (e) (2 points) Suppose that the money supply falls to M = 4, 500. What is the equation for the AD now? (Express the AD curve as Y being a function of P.) (f) (2 points) Repeat (2d) given than money supply falls to 4,500. (g) (2 points) Explain what you find using the IS LM diagram, and the LRAS curves drawn in the r Y space. Argue whether LM, IS shifted or not and why. (a) r = i π e = i. S = Y C G = Y 1, (Y T )+200 r G = 0.5 Y +200 r 1, T G. Equating S to I, gives the following equation for the IS curve: 0.5 Y r 1, T G = r, or 0.5 Y = 400 r + 1, T + G I.e., the IS curve is: Y = 800 r T + 2 G + 4, 350. Plugging G, and T, the IS curve is: Y = 800 r + 4, 800. (b) Equating the demand for real money balances to supply, the LM curve is: 9, 000/P = 0.5 Y 200 i = 0.5 Y 200 r, or Y = 18, 000/P r. (c) From the IS curve, 400 r = 1/2 Y + 2, 400. Plugging 400 r into the LM curve gives the AD: Y = 18, 000/P 1/2 Y + 2, 400, or 18, 000/P + 2, 400 = 3/2 Y, or Y = 12, 000/P + 1, 600. (d) Since our supply curve is Y = 4, 600, equilibrium output is 4,600. Equilibrium level of P is obtained by setting the aggregate quantity of output demanded equal to the quantity supplied: 12, 000/P = 3, 000, and so P = 4. The real interest rate can be obtained from the IS curve: r = 1/4. C = 1, (4, ) 200 (1/4) = 3, 300. I = (1/4) = 850. (e) When the money supply falls to 4,500, the LM curve will be Y = 9, 000/P r, and the new AD curve is: Y = 6, 000/P + 1, 600. (f) Output stays at Y = 4, 600. From the AD curve, P = 6, 000/3, 000 = 2. From the IS curve, r = 1/4. C=3,300. I=850. 4
5 Money is neutral here, i.e. it does not affect the real variables. The fall in the money supply just causes the fall in the aggregate price level. (g) Your IS LM curve, and the LRAS curve should intersect at the point where r = 1/4, and Y = Y = 4, 600. For a given price level and the real interest rate, there is a shift in the LM curve to the right. But, since the price level drops to P = 2, the real money balances fall to their previous level, and the LM curve shifts back to its original position. Thus, in the end, changes in the money supply lead only to changes in the aggregate price level the monetary neutrality result of classical economics. 3. (5 points) Consider an economy in long-run equilibrium with an inflation rate π of 12% (=0.12) per year and a natural unemployment rate u n of 6% (=0.06). The Phillips curve is π = π e 2(u u n ). Assume that Okun s law holds so that a 1% increase in the unemployment rate maintained for one year reduces GDP by 2% of full-employment output. Consider a four-year disinflation according to the following table: Year π π e (a) (2 points) What is the cyclical unemployment rate in each of the four years? (b) (2 points) By what percentage does output fall short of full-employment output each year? (c) (1 point) What is the sacrifice ratio for this disinflation? Use equations: u = (π π e ). Output shortfall=2.0 (u 0.06). (a) (b) (c) Year π π e u u u n Output shortfall
1. (16 points) For all of the questions below, draw the relevant curves.
Intermediate Macroeconomic Theory II, Fall 2006 Solutions to Problem Set 4 (35 points) 1. (16 points) For all of the questions below, draw the relevant curves. (a) (2 points) Suppose that the government
More informationIntermediate Macroeconomic Theory II, Winter 2007 Instructor: Dmytro Hryshko Solutions to Problem Set 4 (35 points).
Intermediate Macroeconomic Theory II, Winter 2007 Instructor: Dmytro Hryshko Solutions to Problem Set 4 (35 points). 1. (20 points) Use the IS{LM model to determine the short- and long-run eects of each
More information1 Figure 1 (A) shows what the IS LM model looks like for the case in which the Fed holds the
1 Figure 1 (A) shows what the IS LM model looks like for the case in which the Fed holds the money supply constant. Figure 1 (B) shows what the model looks like if the Fed adjusts the money supply to hold
More informationIntermediate Macroeconomic Theory II, Winter 2009 Solutions to Problem Set 2.
Intermediate Macroeconomic Theory II, Winter 2009 Solutions to Problem Set 2. 1. (14 points, 2 points each) Indicate for each of the statements below whether it is true or false, or elaborate on a statement
More informationECO 209Y L0101 MACROECONOMIC THEORY. Term Test #2
Department of Economics Prof. Gustavo Indart University of Toronto June 25, 2012 ECO 209Y L0101 MACROECONOMIC THEORY Term Test #2 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total time for
More information14.02 Principles of Macroeconomics Problem Set # 5, Questions
14.02 Principles of Macroeconomics Problem Set # 5, Questions Posted during Week # 9, due on last day of Week # 11. You must staple a copy of this frontpage on your problem set. Name: (Table is for corrector
More informationIntroduction to Economic Fluctuations
Chapter 9 Introduction to Economic Fluctuations slide 0 In this chapter, you will learn facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an
More informationProblem Set #2. Intermediate Macroeconomics 101 Due 20/8/12
Problem Set #2 Intermediate Macroeconomics 101 Due 20/8/12 Question 1. (Ch3. Q9) The paradox of saving revisited You should be able to complete this question without doing any algebra, although you may
More informationName: Intermediate Macroeconomic Theory II, Fall 2008 Instructor: Dmytro Hryshko Problem Set 2 (53 points). Due Friday, November 14
Name: Intermediate Macroeconomic Theory II, Fall 2008 Instructor: Dmytro Hryshko Problem Set 2 (53 points). Due Friday, November 14 1. (18 points, 2 points each) Indicate for each of the statements below
More informationChapter 9 Chapter 10
Assignment 4 Last Name First Name Chapter 9 Chapter 10 1 a b c d 1 a b c d 2 a b c d 2 a b c d 3 a b c d 3 a b c d 4 a b c d 4 a b c d 5 a b c d 5 a b c d 6 a b c d 6 a b c d 7 a b c d 7 a b c d 8 a b
More informationPractice Problems 30-32
Practice Problems 30-32 1. The budget balance is calculated as: A. T G TR B. T + G TR C. T G + TR D. T + G + TR E. TR T G 2. The government budget balance equals: A. Taxes + Government purchases + Government
More informationIntermediate Macroeconomics-ECO 3203
Intermediate Macroeconomics-ECO 3203 Homework 3 Solution, Summer 2017 Instructor, Yun Wang Instructions: The full points of this homework exercise is 100. Show all your works (necessary steps to get the
More informationEC 205 Macroeconomics I. Lecture 19
EC 205 Macroeconomics I Lecture 19 Macroeconomics I Chapter 12: Aggregate Demand II: Applying the IS-LM Model Equilibrium in the IS-LM model The IS curve represents equilibrium in the goods market. r LM
More informationChapter 9 Introduction to Economic Fluctuations
Chapter 9 Introduction to Economic Fluctuations facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an introduction to aggregate supply in the
More informationSuggested Solutions to Problem Set 5
Econ 154b Spring 2005 Question 1 Suggested Solutions to Problem Set 5 For the period analyzed, of all quarterly changes in the civilian unemployment rate by at least 0.2 percentage points, about 80 were
More informationKOÇ UNIVERSITY ECON 202 Macroeconomics Fall Problem Set VI C = (Y T) I = 380 G = 400 T = 0.20Y Y = C + I + G.
KOÇ UNIVERSITY ECON 202 Macroeconomics Fall 2007 Problem Set VI 1. Consider the following model of an economy: C = 20 + 0.75(Y T) I = 380 G = 400 T = 0.20Y Y = C + I + G. (a) What is the value of the MPC
More informationChapter 11 Aggregate Demand I: Building the IS -LM Model
Chapter 11 Aggregate Demand I: Building the IS -LM Model Modified by Yun Wang Eco 3203 Intermediate Macroeconomics Florida International University Summer 2017 2016 Worth Publishers, all rights reserved
More informationChapter 9. Introduction to Economic Fluctuations (Continued) CHAPTER 9 Introduction to Economic Fluctuations. slide 0
Chapter 9 Introduction to Economic Fluctuations (Continued) slide 0 Stabilization Policies Economic fluctuations (or business cycles) refer to deviations of real GDP growth from its long run average growth
More informationChapter 13 Short Run Aggregate Supply Curve
Chapter 13 Short Run Aggregate Supply Curve two models of aggregate supply in which output depends positively on the price level in the short run about the short-run tradeoff between inflation and unemployment
More informationIntroduction to Economic Fluctuations. Instructor: Dmytro Hryshko
Introduction to Economic Fluctuations Instructor: Dmytro Hryshko 1 / 32 Outline facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an introduction
More informationMankiw Chapter 10. Introduction to Economic Fluctuations. Introduction to Economic Fluctuations CHAPTER 10
Mankiw Chapter 10 0 IN THIS CHAPTER, WE WILL COVER: facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an introduction to aggregate supply in
More informationFinal Exam - Economics 101 (Fall 2009) You will have 120 minutes to complete this exam. There are 105 points and 7 pages
Name Student ID Section day and time Final Exam - Economics 101 (Fall 2009) You will have 120 minutes to complete this exam. There are 105 points and 7 pages Multiple Choice: (20 points total, 2 points
More informationThe demand for goods and services can be written as Y = C(Y
CHAPTER 3 - The Goods Market The Determination of Equilibrium Output The demand for goods and services can be written as Y = C(Y T ) + I(i) + G 1 Previous equation implies that an increase in the interest
More informationGehrke: Macroeconomics Winter term 2012/13. Exercises
Gehrke: 320.120 Macroeconomics Winter term 2012/13 Questions #1 (National accounts) Exercises 1.1 What are the differences between the nominal gross domestic product and the real net national income? 1.2
More informationArchimedean Upper Conservatory Economics, November 2016 Quiz, Unit VI, Stabilization Policies
Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The federal budget tends to move toward _ as the economy. A. deficit; contracts B. deficit; expands C.
More informationMacroeconomics. Introduction to Economic Fluctuations. Zoltán Bartha, PhD Associate Professor. Andrea S. Gubik, PhD Associate Professor
Institute of Economic Theories - University of Miskolc Macroeconomics Introduction to Economic Fluctuations Zoltán Bartha, PhD Associate Professor Andrea S. Gubik, PhD Associate Professor Business cycle:
More information6. The Aggregate Demand and Supply Model
6. The Aggregate Demand and Supply Model 1 Aggregate Demand and Supply Curves The Aggregate Demand Curve It shows the relationship between the inflation rate and the level of aggregate output when the
More informationKyunghun Kim ECN101(SS1, 2014): Homework4 Answer Key Due in class on 7/28
1. AS-AD Model Suppose that government spending rises in an economy. Assume that the short-run aggregate supply curve is upward sloping. a. Draw the AS-AD model to show long-run and short-run equilibria
More informationEconomics 102 Discussion Handout Week 14 Spring Aggregate Supply and Demand: Summary
Economics 102 Discussion Handout Week 14 Spring 2018 Aggregate Supply and Demand: Summary The Aggregate Demand Curve The aggregate demand curve (AD) shows the relationship between the aggregate price level
More informationECON 3560/5040 Week 8-9
ECON 3560/5040 Week 8-9 AGGREGATE DEMAND 1. Keynes s Theory - John Maynard Keynes (1936) criticized classical theory for assuming that AS alone capital, labor, and technology determines national income
More informationExamination Period 3: 2016/17
Examination Period 3: 2016/17 ECN201217N Module Title Level Time Allowed Intermediate Macroeconomics Five Two hours Instructions to students: Enter your student number not your name on all answer books.
More informationophillips Curve Multiple Choice Identify the choice that best completes the statement or answers the question.
ophillips Curve Multiple Choice Identify the choice that best completes the statement or answers the question. 1. If the natural rate of unemployment is 5%, and the actual rate of unemployment is 4%: A.
More informationChapter 10 Aggregate Demand I CHAPTER 10 0
Chapter 10 Aggregate Demand I CHAPTER 10 0 1 CHAPTER 10 1 2 Learning Objectives Chapter 9 introduced the model of aggregate demand and aggregate supply. Long run (Classical Theory) prices flexible output
More informationIII. 9. IS LM: the basic framework to understand macro policy continued Text, ch 11
Objectives: To apply IS-LM analysis to understand the causes of short-run fluctuations in real GDP and the short-run impact of monetary and fiscal policies on the economy. To use the IS-LM model to analyse
More informationArchimedean Upper Conservatory Economics, October 2016
Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The marginal propensity to consume is equal to: A. the proportion of consumer spending as a function of
More informationECON 3010 Intermediate Macroeconomics Final Exam
ECON 3010 Intermediate Macroeconomics Final Exam Multiple Choice Questions. (60 points; 3 pts each) 1. The returns to scale in the production function YY = KK 0.5 LL 0.5 are: A) decreasing. B) constant.
More informationMACROECONOMICS. Aggregate Demand I: Building the IS-LM Model. N. Gregory Mankiw. PowerPoint Slides by Ron Cronovich
11 : Building the IS-LM Model MACROECONOMICS N. Gregory Mankiw PowerPoint Slides by Ron Cronovich 2013 Worth Publishers, all rights reserved IN THIS CHAPTER, YOU WILL LEARN: the IS curve and its relation
More informationECON Intermediate Macroeconomic Theory
ECON 3510 - Intermediate Macroeconomic Theory Fall 2015 Mankiw, Macroeconomics, 8th ed., Chapter 12 Chapter 12: Aggregate Demand 2: Applying the IS-LM Model Key points: Policy in the IS LM model: Monetary
More informationECON 3010 Intermediate Macroeconomics Chapter 10
ECON 3010 Intermediate Macroeconomics Chapter 10 Introduction to Economic Fluctuations Facts about the business cycle GDP growth averages 3 3.5 percent per year C (consumption) and I (Investment) fluctuate
More information2.2 Aggregate demand and aggregate supply
The business cycle Short-term fluctuations and long-term trend Explain, using a business cycle diagram, that economies typically tend to go through a cyclical pattern characterized by the phases of the
More informationMidterm 2 - Economics 101 (Fall 2009) You will have 45 minutes to complete this exam. There are 5 pages and 63 points. Version A.
Name Student ID Section day and time Midterm 2 - Economics 101 (Fall 2009) You will have 45 minutes to complete this exam. There are 5 pages and 63 points. Version A. Multiple Choice: (16 points total,
More informationAnswers to Questions: Chapter 8
Answers to Questions in Textbook 1 Answers to Questions: Chapter 8 1. In microeconomics, the demand curve shows the various quantities of a specific product that a consumer wants at various prices for
More information13. CHAPTER: Aggregate Supply
TOBB-ETU, Economics Department Macroeconomics I (IKT 233) Ozan Eksi Practice Questions with Answers (for Final) 13. CHAPTER: Aggregate Supply 1-) What can you expect when there s an oil shock? (c) a-)
More informationPrinciple of Macroeconomics, Summer B Practice Exam
Principle of Macroeconomics, Summer B 2017 Practice Exam 1) If real GDP in a small country in 2015 is $8 billion and real GDP in the same country in 2016 is $8.3 billion, the growth rate of real GDP between
More informationChapter 12 Aggregate Demand II: Applying the IS -LM Model
Chapter 12 Aggregate Demand II: Applying the IS -LM Model Modified by un Wang Eco 3203 Intermediate Macroeconomics Florida International University Summer 2017 2016 Worth Publishers, all rights reserved
More informationSuggested Solutions to Problem Set 7
Econ 154b Spring 2005 Question 1 Suggested Solutions to Problem Set 7 The IS curve is Y C d I d G 600 0.8ŸY"1000 "500r 400"500r 1000, so 0.2Y 1200"1000r. This is plotted below: Since= e 0, the nominal
More information13. CHAPTER: Aggregate Supply
TOBB-ETU, Economics Department Macroeconomics I (IKT 233) 2017/18 Fall-Ozan Eksi Practice Questions with Answers (for Final) 13. CHAPTER: Aggregate Supply 1-) What can you expect when there s an oil shock?
More informationUniversity of Toronto June 17, 2002 ECO 208Y - L5101 MACROECONOMIC THEORY. Term Test #1 LAST NAME FIRST NAME
Department of Economics Prof. Gustavo Indart University of Toronto June 17, 2002 SOLUTION ECO 208Y - L5101 MACROECONOMIC THEORY Term Test #1 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total
More informationIntroduction to Economic Fluctuations
CHAPTER 10 Introduction to Economic Fluctuations Modified for ECON 2204 by Bob Murphy 2016 Worth Publishers, all rights reserved IN THIS CHAPTER, OU WILL LEARN: facts about the business cycle how the short
More informationECNS Fall 2009 Practice Examination Opportunity
ECNS 202 -- Fall 2009 Practice Examination Opportunity Mark the answer on the provided scantron sheet using a #2 lead pencil. Erase completely. I am not responsible for poorly marked or poorly erased asnwers.
More information4 Theory of Economic Fluctuations
4 Theory of Economic Fluctuations 4.1 Business Cycles 4.2 The IS-LM model 4.3 The AD-AS model 4.4 (Neo-) Classical Models of Fluctuations, 4.5 (New-) Keynesian Models of Fluctuations PART 4.3 The AD-AS
More informationProblem Set #2. Intermediate Macroeconomics 101 Due 20/8/12
Problem Set #2 Intermediate Macroeconomics 101 Due 20/8/12 Question 1. (Ch3. Q9) The paradox of saving revisited You should be able to complete this question without doing any algebra, although you may
More informationLecture 12: Economic Fluctuations. Rob Godby University of Wyoming
Lecture 12: Economic Fluctuations Rob Godby University of Wyoming Short-Run Economic Fluctuations Economic activity fluctuates from year to year. In some years, the production of goods and services rises.
More information9. ISLM model. Introduction to Economic Fluctuations CHAPTER 9. slide 0
9. ISLM model slide 0 In this lecture, you will learn an introduction to business cycle and aggregate demand the IS curve, and its relation to the Keynesian cross the loanable funds model the LM curve,
More informationAggregate Supply and Aggregate Demand
Aggregate Supply and Aggregate Demand ECO 301: Money and Banking 1 1.1 Goals Goals Specific Goals Be able to explain GDP fluctuations when the price level is also flexible. Explain how real GDP and the
More informationSuggested Answers Problem Set # 5 Economics 501 Daniel
1. Use graphs of IS-LM-FE and AS-AD models to explain why RBC models with productivity shocks and money-supply shocks fail to explain the pro-cyclicality of money growth and inflation. Inflation falls
More informationBusiness Fluctuations. Notes 05. Preface. IS Relation. LM Relation. The IS and the LM Together. Does the IS-LM Model Fit the Facts?
ECON 421: Spring 2015 Tu 6:00PM 9:00PM Section 102 Created by Richard Schwinn Based on Macroeconomics, Blanchard and Johnson [2011] Before diving into this material, Take stock of the techniques and relationships
More informationUniversity of Toronto July 27, 2006 ECO 209Y - L5101 MACROECONOMIC THEORY. Term Test #2 DO NOT WRITE IN THIS SPACE. Part I /30.
Department of Economics Prof. Gustavo Indart University of Toronto July 27, 2006 SOLUTION ECO 209Y - L5101 MACROECONOMIC THEORY Term Test #2 LAST NAME FIRST NAME INSTRUCTIONS: STUDENT NUMBER 1. The total
More informationProblem Set #3 ANSWERS. Due Tuesday, March 18, 2008
Name: SID: Discussion Section: Problem Set #3 ANSWERS Due Tuesday, March 18, 2008 Problem Sets MUST be word-processed except for graphs and equations. When drawing diagrams, the following rules apply:
More informationLecture 22. Aggregate demand and aggregate supply
Lecture 22 Aggregate demand and aggregate supply By the end of this lecture, you should understand: three key facts about short-run economic fluctuations how the economy in the short run differs from the
More informationmacro macroeconomics Aggregate Demand I N. Gregory Mankiw CHAPTER TEN PowerPoint Slides by Ron Cronovich fifth edition
macro CHAPTER TEN Aggregate Demand I macroeconomics fifth edition N. Gregory Mankiw PowerPoint Slides by Ron Cronovich 2002 Worth Publishers, all rights reserved In this chapter you will learn the IS curve,
More informationTradeoff Between Inflation and Unemployment
CHAPTER 13 Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment Questions for Review 1. In this chapter we looked at two models of the short-run aggregate supply curve. Both models
More informationEconomics 102 Discussion Handout Week 14 Spring Aggregate Supply and Demand: Summary
Economics 102 Discussion Handout Week 14 Spring 2018 Aggregate Supply and Demand: Summary The Aggregate Demand Curve The aggregate demand curve (AD) shows the relationship between the aggregate price level
More informationECO 209Y MACROECONOMIC THEORY AND POLICY
Department of Economics Prof. Gustavo Indart University of Toronto March 14, 2007 ECO 209Y MACROECONOMIC THEORY AND POLICY SOLUTION Term Test #3 LAST NAME FIRST NAME STUDENT NUMBER Circle the section of
More informationPart I (45 points; Mark your answers in a SCANTRON)
Final Examination Name: ECON 4020/ SPRING 2005 Instructor: Dr. M. Nirei 1:30 3:20 pm, April 28, 2005 Part I (45 points; Mark your answers in a SCANTRON) (1) The GDP deflator is equal to: a. the ratio of
More informationMacroeconomics LESSON 6 ACTIVITY 41
Macroeconomics LESSON 6 ACTIVITY 41 Real Interest Rates and Nominal Interest Rates If you bought a one-year bond for $1,000 and the bond paid an interest rate of 10 percent, at the end of the year would
More informationOVERVIEW. 1. This chapter presents a graphical approach to the determination of income. Two different graphical approaches are provided.
24 KEYNESIAN CROSS OVERVIEW 1. This chapter presents a graphical approach to the determination of income. Two different graphical approaches are provided. 2. Initially, both the consumption function and
More informationHomework 4 of ETP Economics
Homework 4 of ETP Economics Winter Term 2014 Due: May 28 1.When the money market is drawn with the value of money on the vertical axis, if the price level is above the equilibrium level, there is an a.
More informationEcon 102 Discussion Section 8 (Chapter 12, 13) March 20, 2015
Econ 102 Discussion Section 8 (Chapter 12, 13) March 20, 2015 The Multiplier and Shifting the Aggregate Expenditures Function The multiplier effect describes how changes in autonomous expenditures lead
More informationMonetary Macroeconomics Lecture 3. Mark Hayes
Diploma Macro Paper 2 Monetary Macroeconomics Lecture 3 Aggregate demand: Investment and the IS-LM model Mark Hayes slide 1 Outline Introduction Map of the AD-AS model This lecture, continue explaining
More informationMankiw Chapter 14 Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment CHAPTER 14
Mankiw Chapter 14 and the Short-Run Tradeoff Between Inflation and Unemployment 0 IN THIS CHAPTER, WE WILL COVER: two models of aggregate supply in which output depends positively on the price level in
More informationEric Zivot Economics 301 Department of Economics Winter, 1997 University of Washington. Final Exam
Eric Zivot Economics 301 Department of Economics Winter, 1997 University of Washington General Instructions: Final Exam This exam is closed book and closed notes. The time limit is 120 minutes. Please
More informationClass 5. The IS-LM model and Aggregate Demand
Class 5. The IS-LM model and Aggregate Demand 1. Use the Keynesian cross to predict the impact of: a) An increase in government purchases. b) An increase in taxes. c) An equal increase in government purchases
More informationEC202 Macroeconomics
EC202 Macroeconomics Koç University, Summer 2014 by Arhan Ertan Study Questions - 3 1. Suppose a government is able to permanently reduce its budget deficit. Use the Solow growth model of Chapter 9 to
More informationHomework Assignment #3 ECO 3203, Fall Consider a closed economy with demand for goods as follows:
Homework Assignment #3 ECO 3203, Fall 2017 Due: Friday, December 8 th at the beginning of class 1. Consider a closed economy with demand for goods as follows: C = 600 + 0.50(Y T) I = 1200 G = 700 T = 1000
More informationThis paper is not to be removed from the Examination Halls UNIVERSITY OF LONDON
~~EC2065 ZB d0 This paper is not to be removed from the Examination Halls UNIVERSITY OF LONDON EC2065 ZB BSc degrees and Diplomas for Graduates in Economics, Management, Finance and the Social Sciences,
More informationECON 102 Tutorial 3. TA: Iain Snoddy 18 May Vancouver School of Economics
ECON 102 Tutorial 3 TA: Iain Snoddy 18 May 2015 Vancouver School of Economics Questions Questions 1-3 set-up Y C I G X M 1.00 1.00 0.5 0.7 0.45 0.15 2.00 1.65 0.5 0.7 0.45 0.30 3.00 2.30 0.5 0.7 0.45 0.45
More informationECON 3010 Intermediate Macroeconomics Final Exam
ECON 3010 Intermediate Macroeconomics Final Exam Multiple Choice Questions. (60 points; 3 pts each) #1. An economy s equals its. a. consumption; income b. consumption; expenditure on goods and services
More informationMacroeconomics 1 Lecture 11: ASAD model
Macroeconomics 1 Lecture 11: ASAD model Dr Gabriela Grotkowska Lecture objectives difference between short run & long run aggregate demand aggregate supply in the short run & long run see how model of
More informationProblem Set #4 ANSWERS. Due Tuesday, April 1, 2008
Name: SID: Discussion Section: Problem Set #4 ANSWERS Due Tuesday, April 1, 2008 Problem Sets MUST be word-processed except for graphs and equations. When drawing diagrams, the following rules apply: 1.
More information1.1 When the interest rate on a bond rises, the price of the bond. 1.2 In the aggregate demand curve, when the price level decreases demand for goods
Elements of Macroeconomics Econ 180.101 Fall 2017 Problem Set 5 Due in TA section: 10/06/2017 or 10/07/2017 Name (Print): Section/TA: 1. Fill in the blanks 1.1 When the interest rate on a bond rises, the
More informationChapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis
Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Cheng Chen SEF of HKU November 2, 2017 Chen, C. (SEF of HKU) ECON2102/2220: Intermediate Macroeconomics November 2, 2017
More informationAGGREGATE DEMAND. 1. Keynes s Theory
AGGREGATE DEMAND 1. Keynes s Theory - John Maynard Keynes (1936) criticized classical theory for assuming that AS alone capital, labor, and technology determines national income proposed that low AD is
More informationECON 3312 Macroeconomics Exam 2 Spring 2017 Prof. Crowder
ECON 3312 Macroeconomics Exam 2 Spring 2017 Prof. Crowder Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose the economy is currently
More informationPrinciples of Macroeconomics December 15th, 2005 name: Final Exam (100 points)
EC132.01 Serge Kasyanenko Principles of Macroeconomics December 15th, 2005 name: Final Exam (100 points) This is a closed-book exam - you may not use your notes and textbooks. Calculators are not allowed.
More informationAP Econ Practice Test Unit 5
DO NOT WRITE ON THIS TEST! AP Econ Practice Test Unit 5 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The marginal propensity to consume is equal to:
More informationFinal Exam. Name: Student ID: Section:
Final Exam Name: Student ID: Section: Instructions: The exam consists of three parts: (1) 15 multiple choice questions; (2) three problems; and (3) one graphical question. Please answer all questions in
More informationDisposable income (in billions)
Section 4 version 2 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. An increase in the MPC: A. increases the multiplier. B. shifts the autonomous investment
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Econ 330 Spring 2015: FINAL EXAM Name ID Section Number MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose a report was released today that
More informationUNIVERSITY OF TORONTO Faculty of Arts and Science. April Examination 2016 ECO 209Y. Duration: 2 hours
UNIVERSITY OF TORONTO Faculty of Arts and Science April Examination 2016 ECO 209Y Duration: 2 hours Examination Aids allowed: Non-programmable calculators only LAST NAME FIRST NAME STUDENT NUMBER DO NOT
More informationName: Intermediate Macroeconomic Theory II, Fall 2009 Instructor: Dmytro Hryshko Final Exam (35 points). December 8.
Name: Intermediate Macroeconomic Theory II, Fall 2009 Instructor: Dmytro Hryshko Final Exam (35 points). December 8. 1. (5 points) Suppose that the only shocks in the economy are changes in the assessments
More informationArchimedean Upper Conservatory Economics, October 2016
Multiple Choice Identify the choice that best completes the statement or answers the question. Figure 6-2: DVD Market 1. Use the DVD Market Figure 6-2. The figure shows the weekend rental market for DVDs
More informationECON 3150: Exam 2 study guide
ECON 3150: Exam 2 study guide July 26, 2015 Unemployment 1. Define the unemployment rate 2. Define the labor force participation rate 3. Know historic LF participation rate trends in the US 4. Why has
More information1 Multiple-choice questions (2 points each) A) ambiguous both in the short run and in the medium run.
1 Multiple-choice questions (2 points each) 1) Consider I = b 0 +b 1 -b 2 i. The effect of an increase in government spending on investment is A) ambiguous both in the short run and in the medium run.
More informationShanghai Livingston American School Quarterly / Trimester Plan 2
Shanghai Livingston American School Quarterly / Trimester Plan 2 Concept / Topic To Teach: Specific Objectives: Week 1 Week 2 Week 3 Week 4 Unit 3 Module 16 INCOME AND EXPENDITURES Comprehend the nature
More informationANSWER: We can find consumption and saving by solving:
Economics 154a, Spring 2005 Intermediate Macroeconomics Problem Set 4: Answer Key 1. Consider an economy that consists of a single consumer who lives for two time periods. The consumers income in the current
More informationFri. April (PA115)
It is most beneficial to you to write this mock midterm UNDER EXAM CONDITIONS. This means: Complete the midterm in 2.5 hour(s). Work on your own. Keep your notes and textbook closed. Attempt every question.
More informationReview: objectives. CHAPTER 2 The Data of Macroeconomics slide 0
Review: objectives Remind you of the main theories. Overview of how parts of the course all fit together. Draw the most important and general lessons to remember from the course. CHAPTER 2 The Data of
More information9. CHAPTER: Aggregate Demand I
TOBB-ETU, Economics Department Macroeconomics I (IKT 233) Ozan Eksi Practice Questions with Answers (for Final) 9. CHAPTER: Aggregate Demand I 1-) In the long run, the level of output is determined by
More informationAS-AD Model. Prof. Irina A. Telyukova UBC Economics 345 Fall 2008
AS-AD Model Prof. Irina A. Telyukova UBC Economics 345 Fall 2008 Outline Now that we know how to model money supply and money demand, we take a quick look at one model of the aggregate economy. Aggregate
More information