C = 50 + 0.9 · (Y – T)I = 50 - 1000 -rwhere Y is real output and r is the real interest rate. Government purchases and taxes areĞ = 500, T = 500.The money market equilibrium curve-or LM curve-isM YP 5iwhere P is the price level and i is the nominal interest rate. The Central Bank (CB) is initially supplyingM = 10000 units of money, and expected inflation is aº = 0.05. The long-run aggregate supply (LRAS) isY, = 1000.Suddenly, there is a climate shock that changes the marginal propensity to consume (MPC), and theconsumption function changes toC' = 50 + 0.8 - (Y – T).4. Which, if any, of the graphs from Appendix B best depicts the long-run change in output and pricedue to the climate shock? Explain.5. Fill in the following table in your answer sheet with numbers there are 12 numbers to solve for.You do not need to create a table when you type your answers, but please clearly indicate "Before","After" and the name of each variable, followed by your answer.Y C I r(%) _i (%) Pbefore:after: Appendix B Graphs for Q1.4 and Q2.3PricePricelevelYAlevelY.GDPGDPY.'Y,(a)Y,'(b)PricetlevelPricelevelPP'PP'-Y,'GDPGDPY,'Y,Y,(c)(d)

Given: The consumption and investment function are: C = 50 + 0.9 · Y - TI = 50 - 1,000 · r The…

C = 50 + 0.9 · (Y – T) I = 50 – 1000 - r where Y is real output and r is the real interest rate. Government purchases and taxes are G = 500, Ť = 500. The money market cquilibrium curve-or LM curve-is M Y where P is the price level and i is the nominal interest rate. The Central Bank (CB) is initially supplying M = 10000 units of money, and expected inflation is #ª = 0.05. The long-run aggregate supply (LRAS) is Y, = 1000. Suddenly, there is a climate shock that changes the marginal propensity to consume (MPC), and the consumption function changes to cns C' = 50 + 0.8 · (Y – T). 4. Which, if any, of the graphs from Appendix B best depicts the long-run change in output and price due to the climate shock? Explain. 5. Fill in the following table in your answer sheet with mumbers there are 12 mumbers to solve for. You do not need to create a table when you type your answers, but please clearly indicate “Before", "After" and the name of cach variable, followed by your answer. Y CI r (%) i(%) P before: after:

C = 50 + 0.9 · (Y – T) I = 50 – 1000 - r where Y is real output and r is the real interest rate. Government purchases and taxes are G = 500, Ť = 500. The money market cquilibrium curve-or LM curve-is M Y where P is the price level and i is the nominal interest rate. The Central Bank (CB) is initially supplying M = 10000 units of money, and expected inflation is #ª = 0.05. The long-run aggregate supply (LRAS) is Y, = 1000. Suddenly, there is a climate shock that changes the marginal propensity to consume (MPC), and the consumption function changes to cns C' = 50 + 0.8 · (Y – T). 4. Which, if any, of the graphs from Appendix B best depicts the long-run change in output and price due to the climate shock? Explain. 5. Fill in the following table in your answer sheet with mumbers there are 12 mumbers to solve for. You do not need to create a table when you type your answers, but please clearly indicate “Before", "After" and the name of cach variable, followed by your answer. Y CI r (%) i(%) P before: after:

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter24: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 5CQQ

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