Economics Answers

The full effect of fiscal policy may not be realized if not matched with changes in monetary policy, explain using the IS/LM model

Using appropriate model, illustrate the effect of an expansionary fiscal policy in an open economy operating in free exchange rate regime .Assume perfect capital mobility. What is the effect if the government uses monetary policy alternatively?

(a) An open macroeconomic model for a hypothetical economy is represented as follows

Y= C0 +Io+Go+X0-M, M=mo+m1yd,C=co+c1yd, T=tY and Yd=Y-T

1.Show that equal change in tax and government expenditure are expansionary to the economy
2.Derive the equilibrium level of savings in the economy above
3.Derive the investment multiplier

Assume that product Alpha and product Beta are both priced at $1 per unit and that Ellie has $20 to spend on Alpha and Beta. She buys 8 units of Alpha and 12 units of Beta. The marginal utility of Alpha is 40 and the marginal utility of Beta is 20. This indicates that:

An open macroeconomic model for a hypothetical economy is represented as follows
Y= C0 +Io+Go+X0-M, M=mo+m1yd,C=co+c1yd, T=tY and Yd=Y-T
a. Show that equal change in tax and government expenditure are expansionary to the economy
b. Derive the equilibrium level of savings in the economy above
c. Derive the investment multiplier

Kindly answer me above.

Consider the following aggregate expenditure model of the Canadian economy operating with given wages and other factor prices, price level, interest rates, exchange rates, and expectations:
C = 50 + 0.8YD I = 400 G = 500 T = 0.3Y X = 650 IM = 0.36Y
where C is consumption (the 0.8 term represents the marginal propensity to consume) YD is disposable income, I is investment, G is government spending on goods and services, T is the total value of taxes net of transfers (the 0.3 term represents the net tax rate on national income), X is exports, and IM is imports (the 0.36 term represents the marginal propensity to import).

Now suppose that the government decides to use its spending power to restore national income to its original level. By how much must the government increase G to restore the original level of national income? What will happen to the government’s budget balance?

Consider the following aggregate expenditure model of the Canadian economy operating with given wages and other factor prices, price level, interest rates, exchange rates, and expectations:
C = 50 + 0.8YD I = 400 G = 500 T = 0.3Y X = 650 IM = 0.36Y
where C is consumption (the 0.8 term represents the marginal propensity to consume) YD is disposable income, I is investment, G is government spending on goods and services, T is the total value of taxes net of transfers (the 0.3 term represents the net tax rate on national income), X is exports, and IM is imports (the 0.36 term represents the marginal propensity to import).

Suppose that (due to the decrease in world oil prices) Canadian exports decrease by 100 from 650 to 550. What is the new level of GDP? Illustrate in your diagram. What is the effect on the government’s budget balance? What happens to net exports? Can you explain why the change in net exports less than the decrease in exports?

Assume that there are four firms supplying a homogenous product. They
have identical cost
functions given by C (Q) = 40 Q. If the demand curve for the industr
y is given by
μ
= 100 – Q,
find the equilibrium industry output if the producers are Cournot competitor
s. What would be
the resultant market price? What are the profits of each firm?

In an aggregate expenditure model with no government or foreign sectors, represented by C = a + bY and I (an autonomous amount), saving equals investment.

Try to explain - in detail, if possible - if this is true, false, or maybe both (uncertain).
Thanks,
H.M

The short run aggregate supply curve is upward sloping.

Please try to explain why this true, false, or maybe even a bit of both? Thanks...