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Hello, can someone give me the detailed solutions and explanations for those economics questions, please?
Hello, can someone give me the detailed solutions and explanations for those economics questions, please? Thank you so much!
Question 1:
Suppose that we have two identical economies. Both are using fiscal and monetary policies to keep output at the potential output level. Government spending in the two countries are the same but Country A has higher taxes (T) and has an easier monetary policy than Country B.
In a single IS-LM diagram, show theIS and LM curves of the two countries. Explain the difference in positions of the2 countries IS and LM curves.
Compare the levels (higher, lower or the same) of each of the following variables for the two countries cconsumption, investment, net exports and Government deficit. Explain your answer clearly.
Question 2:
If investment is not responsive to interest rate, fiscal policy will be more effective than monetary policy. Using the IS-LM model, comment on whether the statement is true or false. Support your answer with necessary diagrams.
