Assume That in a Certain Economy the LM Curve Is

question 21

Essay

Assume that in a certain economy the LM curve is given by Y = 2,000r - 2,000 + 2(M/P), and the IS curve is given by Y
= 8,000 - 2,000r + u, where u is a shock that is equal to +200 half the time and -200 half the time. The price level (P) is fixed at 1.0. The natural level of output is 4,000. The government wants to keep output as close as possible to 4,000 and does not care about anything else. Consider the following two policy rules:
i. Set the money supply M equal to 1,000 and keep it there.
ii. Manipulate M from day to day to keep the interest rate constant at 2 percent.
a.Under rule i, what will Y be when u = +200? What will Y be under rule i when u = -200? b.Under rule ii, what will Y be when u = +200? What will Y be under rule i when u = -200? c.Which rule will keep output closer to 4,000?

Comprehend how public goods dilemmas are structured and the implications for collective action.

Identify conditions for cooperation or defection in public goods games.

Evaluate the outcomes of games involving mixed strategies and discern conditions for their existence.

Assess the impact of individual contributions to collective endeavors in varying economic settings.

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Definitions:

Quick Ratio

A measure of a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory.

Current Obligations

Short-term financial liabilities or debts that are due within one year or within the normal operating cycle of a business.

Firm's Operations

The day-to-day activities involved in the running of a business for the purpose of producing value for the stakeholders.

Quick Ratio

An indicator of a firm's capacity to fulfill its immediate liabilities using its most easily convertible assets.