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Traditional monetary and fiscal policy-the AS-AD view Consider an economy described by Figure 9-10, with output lower than the natural level of output and the nominal interest rate at zero.
a. Draw Figure 9-10 and explain why the AD curve has a vertical portion.
b. If the Federal Reserve increases the money supply, what will happen to the AS-AD diagram you drew in part (a)? Will equilibrium output move closer to the natural level?
c. Given your answers to part (b), what policy options are available to the government to try to increase output? Consider traditional policy options only, and not financial policies. How does your answer relate to the policy decisions of the Obama administration and the U.S. Congress in February 2009?
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Suppose a consumer has an income of $1000 and faces prices Px = $5 and Py = $10. (a). Write the equation for this consumer's budget constraint. (b). Draw the budget constraint, placing Good X on the horizontal axis. Label it BC.
A consumer enjoys two goods, X and Y. The price of X is $5 and the price of Y is $10 and the consumer has $1500 to spend on these goods. The utility function of the consumer is U = Y √x ; thus MUx = 1/2 Y/ √x and MUy = √x . What bundle of goods wi..
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Suppose the money supply is currently $500 billion and theFed wishes to increase it by $100 billion. If it decided to change the money supply by changing the required reserve ratio, what change should it make
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An inductor, L = 8.8 mH, and a capacitor, C = 57 μF, are connected in parallel with each other, and in series with a resistor, R = 175 Ω, and another inductor, L = 2.9 mH. Sketch the circuit and then determine the magnitude of the current, I , thro..
Since the VPAc€?cs trust you, they asked you to figure out the most they should pay for a license from SohnCo.
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