This topic contains a solution. Click here to go to the answer

Author Question: For this question, assume that the Fed is expected to respond to any event by keeping output ... (Read 54 times)

nmorano1

  • Hero Member
  • *****
  • Posts: 598
For this question, assume that the Fed is expected to respond to any event by keeping output constant (i.e., equal to its initial level). An unexpected increase in government spending will cause
 
  A) stock prices to fall.
  B) stock prices to rise.
  C) no change in stock prices.
  D) an ambiguous effect on stock prices.

Question 2

First, define the LM curve. Second, explain why it has its particular shape.
 
  What will be an ideal response?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

underwood14

  • Sr. Member
  • ****
  • Posts: 346
Answer to Question 1

A

Answer to Question 2

The LM curve illustrates the combinations of the interest rate and level of output that maintain financial market equilibrium. The curve is upward sloping because as income increases, money demand will rise. This increase in money demand will cause an excess demand for money and an excess supply of bonds. Bond prices will fall and the interest rate will increase until equilibrium is restored.




nmorano1

  • Member
  • Posts: 598
Reply 2 on: Jun 30, 2018
Gracias!


fatboyy09

  • Member
  • Posts: 358
Reply 3 on: Yesterday
:D TYSM

 

Did you know?

Cyanide works by making the human body unable to use oxygen.

Did you know?

A strange skin disease referred to as Morgellons has occurred in the southern United States and in California. Symptoms include slowly healing sores, joint pain, persistent fatigue, and a sensation of things crawling through the skin. Another symptom is strange-looking, threadlike extrusions coming out of the skin.

Did you know?

There are more sensory neurons in the tongue than in any other part of the body.

Did you know?

More than one-third of adult Americans are obese. Diseases that kill the largest number of people annually, such as heart disease, cancer, diabetes, stroke, and hypertension, can be attributed to diet.

Did you know?

The Romans did not use numerals to indicate fractions but instead used words to indicate parts of a whole.

For a complete list of videos, visit our video library