can someone help me on this: Use graphs to show the impact in the market for goods and service and in the money market of the following events: (In answering, indicate the effect of each even on AE, Y, M, and r.) a. there is an unexpected decrease in investor confidence, leading to a sharp decrease in orders for new plant and equipment. b. A major new york bank fails, causing a number of people to withdraw a substantial amount of cash from other banks and put it under their mattresses. ANYONE PLEASE HELP!
I fail to see why your texts books wouldn't have this... all pretty basic stuff. a. To show drop off in confidence draw a basic S/D graph, with a seond D line that indicates a drop in the demand - This should indicate a lower price for the Plant equip. For the money market draw a standard S/D for the cash market. The decrease in confidence would cause the S to shift to the left. The D should ^ for S. There for the r would ^. I'm sure you can rattle off something about what affect it has on different parts of the economy (copy your text book and incorporate the question) b. I think you should start with a standard S/D for the cash market, draw another S to the right of the original. And use this to explain why there might be an ^ in the spending on G/S. And then draw a standard S/D graph, with an increase D - caused by the increase in $S. (once again copy your text book and incorporate the question). Use real life examples (maybe Argentina) - and what that does to 'r' in the short and long term. Take care, -Shifty Russian
