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##### Question 1 I need very concise answers to the q...

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Question 1 I need very concise answers to the questions. The questions are independent of each other, unless expressly stated. The purpose is to test your understanding of the basic macroeconomic concepts. a. Suppose that the expenditure multiplier is 2.5 and the Treasury increases the government purchase of goods and services by 10 billion units. What will be the resulting change in the real GDP? b. Suppose the required reserve ratio is 10% and the Fed injects $2 billions of reserves into the banking system. By how much will the money supply increase? c. Suppose that the Cambridge k equals 0.10, the supply of money is M = $1 trillions, and the real GDP = 100 billion units. What is the general price level (the GDP deflator)? d. Start with the numbers in part c. Assume that money supply increases by 10% and the Cambridge k remains constant at k = 0.10 (as in the classical model). What will be the new nominal GDP (I need to see the number)? e. Start with the numbers in part c. Assume that money supply increases by 10%, the real GDP increases by 4%, and the Cambridge k remains constant at k = 0.10 (as in the classical model). What will be the new GDP deflator (I need to see the number)? The figure on the attached document shows the aggregate demand and aggregate supply functions for a country. Wages and prices are rigid in the short run, but adjust to market conditions in the long run. Currently P = 100 and Y = 1000. Analyze the short-run and long-run consequences of the following events on the price level (P) and the real GDP (Y). The questions are independent of each other. The answer to each question should be a short paragraph. a. As in 1990-91, consumer confidence plummets and the aggregate demand function shifts to the left by 400 units. What will happen to P and Y in the very short run (please give me the numbers)? What will happen to P and Y in the long run (please give me the numbers)? Describe the process of self-correcting mechanism from the beginning to the end. b. Firms become optimistic about future profits and the aggregate demand function shifts to the right by 200 units. What will happen to P and Y in the very short run (please give me the numbers)? What will happen to P and Y in the long run (please give me the numbers)? Describe the process of self-correcting mechanism from the beginning to the end. c. OPEC comes and the price of oil increases. As a result, the general price level increases by 20 units. What will happen to P and Y in the very short run (please give me the numbers)? What will happen to P and Y in the long run (please give me the numbers)? Describe the process of self-correcting mechanism from the beginning to the end. d. Discovery of new reserves in Kuwait drastically reduces oil prices. As a result, the general price level decreases by 20 units. What will happen to P and Y in the very short run (please give me the numbers)? What will happen to P and Y in the long run (please give me the numbers)? Describe the process of self-correcting mechanism from the beginning to the end.

Paper#2783 | Written in 18-Jul-2015

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