Purchase Solution

equilibrium GDP

Not what you're looking for?

Ask Custom Question

Suppose that the federal reserve wishes to keep nominal interest rate at a target level of 5%. Draw a money supply and demand diagram in which the current equilibrium interest rate is 5%. Explain how the federal reserve, using Open Market Operations monetary policy, could keep the interest rate at its target level if the demand for money suddenly declines. How does this affect equilibrium GDP?

Purchase this Solution
Solution Summary

The expert investigates the equilibrium GDP.

Solution Preview

When there's a decline in money demand, the Md curve shifts back to the left and put a downward pressure to the interest rate. In order to keep ...

Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

View More Free Quizzes
Related BrainMass Solutions

  • GDP/Equilibrium and MPC

    51031 GDP/Equilibrium and MPC questions GDP/Equilibrium and MPC questions: --- C = 250 Billion +. 80GDP Please use equation above for following questions: 1.

  • Equilibrium GDP

    The consumption function is: C = 100 + 0.8(Y-T) What is equilibrium GDP? What will equilibrium GDP equal if government expenditures increase 200? What will equilibrium GDP equal if taxes decrease 200?

  • Calculating Demand-Side Macroeconomic Equilibrium

    Use the multiplier to find the new equilibrium GDP. f) Confirm your answer to e) by calculating the new expenditure schedule. g) What is the level of savings at the new equilibrium GDP? h) Compare and explain your answers to b) and g). 1.

  • Finding Japan's Equilibrium Real GDP From AD-AS Schedule

    b) The equilibrium is where Aggregate Demand = Aggregate Supply, at P=95 and Real GDP=500. c) Japan's potential GDP is 600 trillion but its equilibrium GDP is only 500 billion. It has a recessionary gap of 100 billion.

  • current long-run equilibrium level of real GDP

    161563 current long-run equilibrium level of real GDP Working with Graphs Consider the graph below, and answer the following questions: a)What is the current long-run equilibrium level of real GDP?

  • find the equilibrium

    : i) The equilibrium GDP and P ii) V if the money supply = 2,500 iii) The equilibrium rate of interest(i) if money demand Md = 2600-1000i Question 1 In order to find the equilibrium C and S, we should first find the equilibrium GDP (denoted

  • Determining Equilibrium Real GDP and the Price Level

    Give reasons to explain whether or how this could affect the following: 1.The current equilibrium interest rate 2.The current equilibrium real GDP 3.The current equilibrium employment 4.The current equilibrium saving 5.The future equilibrium

  • Disposable Income

    This level of GDP does correspond to an equilibrium: Y = C + I + G + NX 375 = 275 + 50 + 50 + 0 So, using this ammendment, the equilibrium GDP in this case would be $375 billion.

  • Marginal Propensity to consume and to save

    A lump sum tax decreases equilibrium GDP (Y) by the amount of the tax times the tax multiplier. --- HYPOTHETICAL INCOME DATA (BILLIONS OF DOLLARS) (NET EXPORTS IS ASSUMED TO BE ZERO) Y (GDP) C I G $0 $100 $80 $60 100 175

  • Level of Equilibrium of GDP

    AD=AS AD=C+I+G+X-M AD=400+100+120+30-50 600 Level of Equilibrium GDP =600 2 What is the GDP gap? GDP GAP= Full Employment GDP- Level of Equilibrium GDP 1400 3 Bush Garden Economy is in recession.

View More Related Solutions