<p>there's the link to the questions. what'd everyone put?</p>
<ol>
<li>(a) I drew the graph
(b) (i) shift the SRAS curve to the left.
(ii) new equilibrium at higher price level and lower output
(c) increase level of unemployment as employers lay off workers to meet increased cost of production
(d) I said that this would cause interest rates to rise, which would cause an influx of Japanese investment aimed at trying to capitalize on the higher rates, which would cause the dollar to rise in value relatve to the yen (e). </li>
</ol>
<p>I'll post my answers to the other questions as I get the motivation to type the responses lol</p>
<p>1)</p>
<p>a) Aggregate Demand and Supply...indicating equilibrium intersections
LRAS is to the right of the intersections at full employment</p>
<p>b) Short Run AS shifts inwards to the left, increasing price level and decreasing real GDP/real Output</p>
<p>c) I am actually not sure at all, but since Price Level went up, i wrote that unemployment would go down in the short-run according to the Phillips Curve....</p>
<p>d) </p>
<p>e) Depreciates relative to Japanese Yen</p>
<p>2)</p>
<p>a) Draw money supply/demand curve
Interest rates on Y axis, Q on x-axis
money supply is vertical, demand is downward sloping</p>
<p>I shifted MD to the right thereby increasing interest rates</p>
<p>b) wasn't sure, but difference between loanable fund and money marked is supply is not vertical but upward sloping. real interest rates also went up? not a clue really though.</p>
<p>c) i) 8 percent
ii) 6 percent</p>
<p>eh...too lazy to write out 3...plus why trust my answers</p>
<p>can someone answer me this: why is the supply curve vertical in the money market graph, but not in the loanable funds one?</p>
<p>jabbermouth, on question 1 part (c), the reason why unemployment would increase is because a leftward shift in the supply curve causes staglation, which means there is both a rise in the price level and in unemployment. As for part (e), an increase in the price level means there is inflation, which means that interest rates are higher, which means that capital is going to flow in from other countries to capitalize on the rate, which I'm pretty sure causes the dollar to rise in value...</p>
<p>What paungle reasoned is what I have put down on the test.
It would make sense, there is less income in the US, so therefore, there is less supply of the US dollar. The decrease of the supply of US dollars will cause the value of the US dollars to apperciate.</p>
<p>talesweaving, could you explain to me why the money market and loanable funds supply curves are the way they are (i.e. MM=vertical LF=normal)? I graphed them the opposite ways on the test, but my graphs still illustrated the point correctly (I made the LF curve vertical and shifted it to the right, and I made the MM curve upward sloping and then shifted the 'demand for money' curve to the right)</p>
<p>yeah the dollar definitely appreciates because exports decrease.</p>
<p>what did people get for 3b? I got increase in unemployment...</p>
<p>I am not exactly sure why the money market slopes vertically, I just memorized it like that for the exam.</p>
<p>However, the loanable fund market is upwards sloping because:
When the interest rates are higher, more people are willing to deposit their funds and forego current consumption, as they will recieve higher payment in the form of higher interest rates.
Think of interest rates like the price for money.</p>
<p>ahh, thank you :)</p>
<p>And I'm pretty sure that for 3b the answer is that there'd be no change in unemployment as the unemployment rate doesn't take into account those that are underemployed (i.e. work part-time).</p>
<p>for the loanable funds mkt, is it ok if i put SRAS and AD instead of supply and demand? i remember my teacher having drawn graphs using SRAS and AD showing the real interest rate of the loanable funds mkt..</p>
<p>^^^ thats what some people i talked to said as well, but wouldnt a reduction to part time employment involuntarily cause temporary frictional unemployment as some people would quit their jobs to find better work?</p>
<p>Collegegirlgirl, I think so, since we're talking about the shortrun total supply of loanable funds, and the total demand for those funds, that would make sense.</p>
<p>ryan228, LOL, I think that while that may be the case in a few instances, the overwhelming majority would keep their jobs to make sure that they at least remain partially employed as opposed to completely UNemployed. Those that quit their jobs in protest would have a negligible effect on the official unemployment rate.</p>
<p>what if i didn't label Quanity of loanable funds but just put Q? also on the y-axis, i only put (i) as in interest rate?</p>
<p>Hope that you have a understanding reader.
The exam's direction explicitly states that you should be clear and concise.
Giving just Q and I is not really clear.</p>
<p>Anyways, number 3 just blew me away.
I never came across a problem that had part-time employment.
I did not know what to make of it, like do they still count for the working force or not? Had to BS my way though it, hope I got some points there.</p>
<p>yah, I definitely botched part 3(c), and I accidentally confused my graphs for 2(a) and (b) (although they still illustrated the correct answer). Other than that, I thought that the test was pretty easy.</p>
<p>wow everyone has different answers......i put that businesses would be reluctant to invest so that less money would be invested in capital thus the dollar depreciates and they would supply more of these dollars for a more stable curency ie the yen. man i was so off i bombed it.......but i did put leftward curve as shift inward.......forgot to write stagflatino oops but for the long run ohilipcs curve i wrote it coincided with the NRU which is about 5% and i did the loanable funds graph right. Hopefully I got about 66% right....barely enough for a 5.</p>
<p>well that's only parts 1(d)and(e) so...I don't think you have too much to worry about if you got everything else right.</p>