According to Keynesian IS-LM model, what is the effect of each of the following on output, the real interest rate, umemployment and the price level? Distinguish between short run and long run.
a) Financial deregulation allows banks to pay a higher interest rate on checking accounts.
b) The introduction of sophisticated credit cards greatly reduces the amount of money that people need for transactions.
c) A severe water shortage causes sharp declines in agricultural output and increases in food prices.
d) A temporary beneficial supply shock affects most of the economy, but no individual firms is affected sufficiently to change its prices in the short run.
2) Under NCM, the use if fiscal policy to fight a recession doesn't make workers better off( assume that the increase in tax liability makes people work harder). suppose that KE is correct. Relative to a policy of doing nothing, does an increase in government purchases that brings the economy to full employment make workers better off? discuss the effects of the fiscal expansion on the real wage, employment, consumption and current and future taxes. How does your answer depend on the direct benefits of the government spending program and the speed with which prices adjust in the absence of fiscal stimulus??
Please help me.... Many Many Thanks!!!!!!
a) Financial deregulation allows banks to pay a higher interest rate on checking accounts.
b) The introduction of sophisticated credit cards greatly reduces the amount of money that people need for transactions.
c) A severe water shortage causes sharp declines in agricultural output and increases in food prices.
d) A temporary beneficial supply shock affects most of the economy, but no individual firms is affected sufficiently to change its prices in the short run.
2) Under NCM, the use if fiscal policy to fight a recession doesn't make workers better off( assume that the increase in tax liability makes people work harder). suppose that KE is correct. Relative to a policy of doing nothing, does an increase in government purchases that brings the economy to full employment make workers better off? discuss the effects of the fiscal expansion on the real wage, employment, consumption and current and future taxes. How does your answer depend on the direct benefits of the government spending program and the speed with which prices adjust in the absence of fiscal stimulus??
Please help me.... Many Many Thanks!!!!!!