dagram below and answer questions 29 and 30. IS LM (mp 29. Suppose that the SARB policy rate is equal to r. Which one of the following statements is correct about the top figure in the diagram? The relationship between the interest rate and the level of output is negative. 1. The relationship between the interest rate and the level of output is positive. 2. The is no relationship between the interest rate and the level of output at point a. 3. 4. There is an uncertain relationship between the interest rate and the level of output. 30. Refer to the bottom figure in the diagram; At point a output level Y is higher than Yn. Identify the INCORRECT options about the short-run equilibrium position. a. The change in inflation is equal to (T- TT-1). b. The change in inflation is less than (Tm- TT-1). C. The inflation rate is on the rise. d. There is no pressure on inflation. The economy is overheating. e. Only a and b Only b and d Only b, e and c Only c, d and e Only d and e 12345 Change in infation rate

dagram below and answer questions 29 and 30. IS LM (mp 29. Suppose that the SARB policy rate is equal to r. Which one of the following statements is correct about the top figure in the diagram? The relationship between the interest rate and the level of output is negative. 1. The relationship between the interest rate and the level of output is positive. 2. The is no relationship between the interest rate and the level of output at point a. 3. 4. There is an uncertain relationship between the interest rate and the level of output. 30. Refer to the bottom figure in the diagram; At point a output level Y is higher than Yn. Identify the INCORRECT options about the short-run equilibrium position. a. The change in inflation is equal to (T- TT-1). b. The change in inflation is less than (Tm- TT-1). C. The inflation rate is on the rise. d. There is no pressure on inflation. The economy is overheating. e. Only a and b Only b and d Only b, e and c Only c, d and e Only d and e 12345 Change in infation rate

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter27: Investment, The Capital Market, And The Wealth Of Nations

Section: Chapter Questions

Problem 14CQ

See similar textbooks

Similar questions

A. Given: C = 700 + .80 (1- t)Y, t=0.25 I = 210 -75i; G= 1000; TR=100 L= 0.20Y- 40i ; M/P = 800 B. Compute:1. The equilibrium income and the equilibrium interest rate2. Show the graph of the IS -LM equilibrium3. If G is increased to 1,500, what will be the new level of equilibrium income and interest rate? What happens to the IS curve?4. If tax rates is increased to 0.35, what will be the new level of equilibrium income and interest rate? What happens to the IS Curve?5. If M/P is increased to 900, what will be the new level of equilibrium income and interest rate? What happens to the LM curve?6. Given the simulated values of equilibrium incomes and interest rates, whatexplanation can you offer on such changes? On its impact in our economy?
In a hypothetical economy, no investment projects are undertaken when the real interest rate is 12 percent or above, 40 projects worth $1 million each are undertaken when the real interest rate is 10 percent, and 40 more projects worth $1 million each are undertaken every time the real interest rate falls by 2 percent until it reaches a value of zero. a. Draw a graph showing the investment demand curve. Plot 7 points in total using the line tool (investment demand curve) given below. Investment Demand Curve 14 Tools 12 investment de 10 8. 6. 4. 40 80 120 160 200 240 280 Investment (2017 $ million) b. If the real interest rate is 6% then $ million of investment will take place in this economy. c. If the real interest rate rises to 4% then investment (Click to select) V to $ million. Real Rate of Return and Interest (%)
Given the following information: C = Ca + 0.8Yd Ip = 1900 - 40r G = 1800 NX = 700 - 0.14Y T = 200 + 0.20 Y Ca = 260 - 10r Md/P = 0.25Y - 25r Ms/P = 2000 Find: 1. The equilibrium level of interest rate and output. 2. If Government expenditure increased by 100, find the new equilibrium level of interest rate and output
The following equations describe an economy. Y = C + I + G. C = 120 + 0.5( Y - T ). I = 100 - 10r. G = 50. T = 40. ( M/ P) d = Y - 20r. M = 600. P = 2. What are the equilibrium level of income and the equilibrium interest rate? If the government increases government spending by 45, what will be the new equilibrium level of income and equilibrium interest rate?
In a hypothetical economy, no Investment projects are undertaken when the real Interest rate is 12 percent or above, 40 projects worth $1 million each are undertaken when the real Interest rate is 10 percent, and 40 more projects worth $1 million each are undertaken every time the real interest rate falls by 2 percent until it reaches a value of zero. a. Draw a graph showing the investment demand curve. Plot 7 points in total using the line tool (investment demand curve) given below. Real Rate of Return and Interest (%) 14 12 10 8 50 2 0 Investment Demand Curve 40 80 120 160 200 240 280 Investment (2017 $ million) Tools investment de
2. An economy is initially described by the following equations: C= 600 + 0.75(Y - T) I= 1,200 – 50i M/P = Y – 200i G= 2000 %3D T= 2000 M = 4,000 P = 2 a. Derive and graph the IS curve and the LM curve. Calculate the equilibrium interest rate and level of income. Label that point A on your graph. b. Suppose that a newly elected president cuts taxes by 20 percent. Assuming the money supply is held constant, what are the new equilibrium interest rate and level of income? What is the tax multiplier? 1 c. Now assume that the central bank adjusts the money supply to hold the interest rate constant. d. What is the new level of income? What must the new money supply be? What is the tax multiplier? e. Now assume that the central bank adjusts the money supply to hold the level of income constant. What is the new equilibrium interest rate? What must the money supply be? What is the tax multiplier?
Suppose you have the following information from a closed economy: C = 200+ 0.25 YD I = 150 +0.25Y 1000i T = 200 G = 250 ī= 0.05 -
nheducation.com/flow/connect.html 10 Homework Saved Help Save & E Refer to the table below and suppose that the real interest rate is 6 percent. Next, assume that some factor changes such that the expected rate of return declines by 2 percentage points at each prospective level of investment. Cumulative Amount of Investment Having This Rate of Return or Higher (Billions per Year) Real Interest Rate (i) and Expected Rate of Return (r) 16% $0 14 5 12 10 10 15 20 25 30 4 35 2 40 0 Instructions: Enter your answer as a whole number a. Assuming no change in the real interest rate, by how much and in what direction will investment change? Next 12 of 16
Assume the following model of the economy: Y = C + I + G C = 120 + 0.5(Y - T) I = 100 - 10r G = 50 T = 40 Md = Y - 20 r Ms = 600 P = 2 What are the equilibrium level of income and equilibrium interest rate?
Identify the effect of recession in the economy on either demand or supply curve and the equilibruim interest rates.Explain using a diagram
Assume the following model of the economy: Y = C + I + G C = 120 + 0.5(Y - T) I = 100 - 10r G = 50 T = 40 Md = Y - 20 r Ms = 600 P = 2 Graph both the IS and the LM curves. Use r = 5, 10, 15 What are the equilibrium level of income and equilibrium interest rate?
22. What could have caused the Investment function to move from I1 to I2? 23. Assuming that the Investment function moves from I1 to I2, and assuming the market rate of interest in at 15%, by how much would investment spending decrease?