3) Draw the IS-MP framework and show the effect of a rise in liquidity risk in the economy. Show up happens to: a) The real interest rate -> b) The output gap c) Actual GDP d) Potential GDP-
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3) Draw the IS-MP framework and show the effect of a rise in liquidity risk in the economy. Show up happens to: a) The real interest rate -> b) The output gap c) Actual
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- 1. Which of the following is concerned with changing the aggregate demand of thenation?A) External balanceB) Internal balanceC) Expenditure-changing policiesD) Expenditure-switching policiesAnswer: 2. Which of the following is an example of an expansionary monetary policy?A) Increase in TaxesB) Increase in the nation's money supplyC)Increased government expendituresD) Reduction in taxesAnswer:1. Consider a closed economy characterised by the IS-LM/AS-AD framework. (a) Illustrate and explain the short-run and long-run impact on the economy of a permanent reduction on private investment. (b) Illustrate and explain the short-run and long-run impact on the economy of a permanent decrease in money demand. (c) What can the government do to reduce the impact on output of the shocks described in (a) and (b)?3. a) What does the Keynesian Theory of Liquidity Preference say?b) Suppose the government of a country increases spending on roads and highways by 1000 crore taka. Show graphically and explain why might this shift be larger than 1000 crore taka.
- 3) Assume financial corporate defaults increase. a. Draw the bond markets for Treasury bonds and corporate bonds and graph the impact of the increase in defaults on corporate bonds. Be sure to label the risk premium. b. Graph the IS-MP-AS/AD impacts of the event. Assume the economy was initially at a LR equilibrium.1. What is the present status of consumer confidence as measured by the Conference Board’s index? 2. How will this affect Aggregate Spending? Be detailedWhen a cyber attack targeting commercial banks results in a slowdown of the check-clearing process, float tends to ________ causing the Central Bank to initiate ________ open market ________. A. increase; defensive; sales B. decrease; defensive; sales C. decrease; dynamic; purchases D. increase; dynamic; purchases
- "that lowering interest rates in the recessionary COVID-19 period is good policy because it will guarantee consumers will spend more as it is cheaper to borrow money" do you agree or disagree with this statement? provide two reasons why?Economics 1) Which of the following best describes the multiplier effect A an initial increase in interest rate leads to larger increase in GDB B An Initial increase in aggregate supply leads to larger increase in GDP C an initial increase in goverment income lead to larger increase in GDP D An Initial increase in injection lead to larger increase in GDP 2. the term business sysle refer to the A short term up and down in the economy B. short term up and down in the price level C. long term trend in the price level 2.Which of the following can hurt economic growth in the short run but help it in the long run? O population growth O improved health and nutrition O enforcement of property rights O increased educational attainment O political stability Question 31 Assume the RRR is 8% and that the deposit creation multiplier works as described in class (i.e., the "simplified" deposit creation multiplier). What will be the total of deposits in the banking system resulting from an initial deposit of $1,000? O $8,000 O $5,000. $10,000 O $1,250
- Price stability: Suppose you are the head of the central bank and your mandateis to maintain the price level at a constant value. Explain what you would doto the money supply in response to each of the following events:(a) Real GDP increases by 4% during a boom.(b) Real GDP declines by 1% during a recession.(c) Real GDP is growing at 3% per year.(d) Te velocity of money increases by 2%.(e) Te velocity of money declines by 1%.Only 1 is wrong Which of the following information is wrong?A) The constant decrease in the general level of prices is called disinfection.B) The combination of inflation and recession is called slumpflation.C) If the Marginal Tendency of Saving increases, the slope of the Total Expenditure Line increases.D) In an open economy, the sum of Marginal Savings Tendency and Marginal Import Tendency is less than 1.E) A liquidity trap is called the situation where nobody demands bonds because the bond prices are maximum and everyone prefers to wait in money at the minimum interest rate.9) Consider a credit boom where bank lending increases a) What is likely to happen to the money supply? Explain. b) Explain whether such a boom would more likely be inflationary or deflationary. c) Given your answer from (b), would borrowers or lenders more likely benefit?
