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yellowsea-lion330Lv1

28 Sep 2019

In our lecture, we derive what will happen in the stock market if there is an increase in consumer spending. Now, suppose there is a decrease in consumer spending, what will happen to the stock market? Please use the IS-LM model to help analyze the effects.

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28 Sep 2019

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Suppose that government spending makes private firms more productive; for example, government spending on roads and bridges lowers the cost of transportation. This means that there are now two effects of government spending, the first being the effects discussed in this chapter of an increase in G and the second being similar to the effects of an increase in the nation’s capital stock K.

a. Show that an increase in government spending that is productive in this fashion could increase welfare for the representative consumer.

b. Show that the equilibrium effects on consumption and hours worked for an increase in government spending of this type is ambiguous but that output increases. You must consider income and substitution effects to show this.

oliveswan581

a. Show that an increase in government spending that is productive in this fashion could increase welfare for the representative consumer.

b. Show that the equilibrium effects on consumption and hours worked for an increase in government spending of this type are ambiguous but that output increases. You must consider income and substitution effects to show this.

All the questions from "Output, Exchange Rates, Macroeconomic Policy, and Open-economy IS-LM-FX Model."

Please answer these questions completely. It is important to me.

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6. The TB (i.e., EX â IM) is part of the short-run spending equation. With sticky prices, what would be the effect on the TB with an increase (depreciation) of the home nation's exchange rate?

A. Consumers in the home nation would find it more expensive to buy domestic goods compared to foreign goods, and the trade balance would decrease.

B. Consumers in the home nation would cut back on both domestic and foreign goods and the trade balance would decrease.

C. Consumers in the home nation would increase spending on both domestic and foreign goods, and the trade balance would be unchanged.

D. Consumers in the home nation would increase spending on domestic goods and decrease spending on foreign goods, causing the trade balance to increase.

11. A shift to the left by the IS curve can be achieved by all of the following EXCEPT a(n):

A. decrease in government spending.

B. increase in taxes.

C. increase in the foreign interest rate.

D. decrease in future expected exchange rate Ee.

13. The LM curve will shift to the left, if there is a(n):

A. increase in money supply.

B. increase in interest rate.

C. decrease in money supply.

D. increase in output.

14. If taxes fall and foreign income falls, what will happen to output, ceteris paribus?

A. It will rise.

B. It will stay the same.

C. It will fall.

D. It is uncertain what will happen.

15. Using the IS-LM-FX framework, if we observe that income and interest rate both rise in the Eurozone, this could be the result of

A. contractionary monetary policy pursued by the European Central Bank.

B. expansionary monetary policy pursued by the Federal Reserve System (U.S. central bank).

C. a stock market crash in the Eurozone.

D. increases in government spending in the Eurozone.

18. Whenever U.S. government spending increases,

A. output will not change at all if the U.S. fixes the exchange rate of dollar against major currencies.

B. output will increase by a larger amount when dollar floats than when dollar pegs to other currencies.

C. output will increase by a smaller amount when dollar floats than when dollar pegs to other currencies.

D. output will not change at all since the U.S. adopts a flexible exchange rate.

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In our lecture, we derive what will happen in the stock market if there is an increase in consumer spending. Now, suppose there is a decrease in consumer spending, what will happen to the stock market? Please use the IS-LM model to help analyze the effects.

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