- +44 141 628 6080
- [email protected]

You need both equations and clearly labeled graphs separate

You need both equations and clearly labeled graphs (separate graphs for each question) to answer the following questions. Assume that b=1/2 and that initially the real interest rate is equal to the marginal product of capital at 3%. As well, assume that v=2 and that the inflation rate last period was 2%. Assume the natural rate of unemployment is 5.5%.

a. The Sequester is probably a bad idea. Use the IS-MP model we developed in class to explain what should happen to the economy if the government cuts spending by 1 percentage point of potential GDP.

b. How much can we expect this to increase the unemployment rate? (no need for a graph)

c. How much will this change inflation? What will the inflation rate be in the period of the cuts?

d. What was the nominal interest rate last period (before the cuts) if the real rate was equal to the marginal product of capital.

e. What happens to the real rate of interest this period (after the cuts) if the Federal Reserve does nothing to change the nominal rate. What will this do to the economy? Remember that the government has cut spending in question 2a.

f. What does the Federal Reserve have to change the nominal interest rate to in order to close the output gap?

Expected delivery within 24 Hours

1960269

Questions

Asked

3,689

Active Tutors

1428507

Questions

Answered

**
Start Excelling in your courses, Ask a tutor for help and get answers for your problems !! **

Â©TutorsGlobe All rights reserved 2022-2023.

## Q : Compute standard deviation of the mean and show in a

assessmentstask 1descriptionthe latest abs retail trade figures show that australian retail turnover fell 08 in july