Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Microeconomics Expert

Interaction between monetary & fiscal policy.
In the IS-LM model, monetary and fiscal policy variables are taken exogenously. While it is possible to examine the effect of each policy separately, there is a strong likelihood that the two policies are interacted which may alter the impact of the original policy change. For instance, monetary policymakers may adjust money supply in response to changes in fiscal policy, and vice versa. Now, suppose Congress increases government spending (fiscal policy). Indeed, as indicated by data, the US government spending has increased by 66% from the year of 2000 to 2008, more than doubled than the previous period. In response to the fiscal policy, the Federal Reserve can react with the followings:

a. hold money supply (M) constant
b. hold real interest rate (r) constant
c. decrease money supply (M)
d. increase money supply (M).

Using IS-LM model, analyze the effects of each of the fiscal and monetary policies above on interest rate and output. For each response, draw a graph and prepare a brief explanation (not more than four sentences). Use graph(s) and notations as given in class/textbook. Also, be neat in your works. Poor labeling (of graphs) can cost you significant points. WITHOUT explanations to support your graphs, you will get very minimal credit.

a. hold money supply (M) constant

b. hold real interest rate (r) constant

c. decrease money supply (M)

d. increase money supply (M).

e. Why the adverse effect on output is larger when the Fed is decreasing money supply than holding it constant? describe.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M940721

Have any Question? 


Related Questions in Microeconomics

The purpose of an assignment is to ensure that the learner

The purpose of an assignment is to ensure that the Learner is able to: - Use methods of enquiry and research in a disciplined field. - Interpret and evaluate text. - Have a sound understanding of key principles and theor ...

Assignment land restoration proposalpart 1please see

Assignment: Land Restoration Proposal Part 1 Please see attachment for part 1 and only complete highlighted section for this assignment. Your team has been given the land rights to a 100-acre abandoned parcel of land. Th ...

1 a explain in clear language the economic inefficiency

1. a) Explain in clear language the economic inefficiency associated with adverse selection. b) The ACA (aka Obamacare) included an insurance mandate, which forces everyone to purchase insurance or face a penalty. Under ...

Economics assignmentcontentselect a news article with

Economics Assignment Content: Select a news article with economic implications within the previous six months and explain, analyze and expand the issue using the economic concepts and theory learned in this class. Includ ...

Assignmentioverview provide an overview consisting of a

Assignment I. Overview: Provide an overview consisting of a brief description of the chosen company, your chosen product or service, and annual sales. II. Macroeconomic Variables For this section, you will utilize macroe ...

Assignment-money and pricesjaydeethe organizations

Assignment-Money and Prices Jaydee The organization's strategic plan you wrote about in Week 2 calls for an aggressive growth plan, requiring investment in facilities and equipment, growth in productivity, and labor over ...

New jersey human servicesassignment evaluation of the

NEW JERSEY HUMAN SERVICES Assignment: Evaluation of the Agency's Budgeting and Cumulative Report As a consultant, you need to develop an in-depth analysis and evaluation of the selected agency's budgeting and then provid ...

Topic minimum wage workers who actually are minimum wage

Topic: Minimum wage workers _ Who actually are minimum wage workers? _ What are the profites of raising minimum wage? _ What are the con's of raising minimum wage? _ What in your opinion should we do about minimum wage?

Assignmentyou are the director of safety and health at

Assignment You are the Director of Safety and Health at Rotorcraft America, a mid-sized company that designs, manufactures and sells helicopters. Your organization has manufacturing operations in San Francisco, Californi ...

Assignmentquestion a daoism amp confucianism as fisher

Assignment Question A: DAOISM & CONFUCIANISM. As Fisher states in our textbook, "Individuals often harmonize the apparently opposite characteristics of Daoism and Confucianism in their own lives." In what specific ways m ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro