Blue line circle symbols is a demand-for-money line

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Q1. Drew's lawn-mowing service is a profit maximizing, competitive firm. He charges $27 every lawn. His total costs each day are $280 of which $30 are fixed costs. He cuts 10 lawns a day. Illustrate what can you say about Drew's short-run decision regarding shut-down?

Q2. The blue line (circle symbols) is a demand-for-money line and the orange line (square symbols) is a money supply line. Assume that the Federal Reserve implements an expansionary policy. Using the red line (cross symbols), Explain how the effect of this policy by drawing a new line, parallel to one of the lines already in the diagram. The new equilibrium must result in an equilibrium interest rate of 4%.

Reference no: EM1317755

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