Explain equilibrium interest rates for federal funds rate

Reference no: EM13207423

Suppose that the equation for autonomous planned spending, Ap, is Ap=6200-200r and the value of the multiplier,k, is 2.5.

A) Derive the equation for the IS curve, Y=k*Ap. GRaph for interest rates 0 & 8, with intervals of one-half of a percentage point.

B) Suppose the equation for th LM curve is Y=13500+100r. Use this equation to explain the level of income at which there is a zero lower bound on the federal funds rate, the interest rate that the Fed controls.

C) Graph the LM curve for interest rates between & 8 with intervals of one-half a percentage point.

D) Suppose that the term premium is 1.0 percentage point and the risk premium is 2.0 percantage points. Use the M curve with the zero lower bound and the term premium and risk premium to graph the LM curve for the govenrment bond rate and the LM curve for the private bond rate at interest rates between 0 & 8, with intervals ofone-half of a percentage point.

E) Explain the equilibrium interest rates for the federal funds rate, the government bond rate, and the private bond rate are and what the equilibrium level of income is using the three graphs

Reference no: EM13207423

Questions Cloud

Evolving learning trip travel trends in the 21st century : Describe how these evolving learning trip travel trends in the 21st century affect the strategies of tourism destinations to meet the new demands. Provide relevant examples".

Develop a draft of the wbs for the tournament : Make a list of the major deliverables for the project and use them to develop a draft of the WBS for the tournament that contains at least three levels of detail (for some of the items). What are the major deliverables associated with hosting an even..

Romantic writers and artists expressed : Romantic writers and artists expressed, The Sturm und Drang movement, Ricardo's "iron law of wages" held that wages for workers

Evaluating billing and coding compliance strategies : In your essay, provide an overview of the compliance process, and offer your judgment either supporting or criticizing a particular method. Make suggestions for improvement at the end of your evaluation.

Explain equilibrium interest rates for federal funds rate : Suppose that the term premium is 1.0 percentage point and the risk premium is 2.0 percantage points. Use the M curve with the zero lower bound and the term premium and risk premium to graph the LM curve for the govenrment bond rate.

Compute the mass of butane needed to produce carbon : Calculate the mass of butane needed to produce 89.8g of carbon dioxide. express the mass of butane numerically

How juans income and robertos transactions are represented : Juan owns office buildings and rents his buildings to companies in exchange for rent payments. Roberto regularly pays a lawn-care company to mow his lawn. Explain how Juan's income and Roberto's transactions are represented in the circular flow di..

State atomic emission measurement of concentration : Why does an atomic emission measurement of concentration have more error associated with it than an atomic absorption

Explain did you face a tradeoff : The night before an economic exam, you decide to go to the movies instead of staying home and working your MyEconLab study plan. You get 50 percent on your exam compared with the 70 percent that you normally score.

User Account

All Pages