Economics Homework Help

Use ISLM and ADAS models to illustrate a long-run equilibrium in the U.S. economy. Use the short-run

aggregate supply curve for your ADAS diagram. Make sure to label axes, curves, and all equilibria.

1. a) Consider an outbreak of coronavirus in early 2020. As the COVID-19 decease starts turning into a global pandemic, many people in the U.S. start to self-quarantine. Illustrate the self-quarantine effect on your diagrams.Comment on how and why key macroeconomic variables change, if any.
2. b) What was the federal funds rate target on March 10, 2020? (You might want to check this number online.)The Fed holds an emergency meeting and slashes the federal funds rate by 100 basis points. What is the new federal funds target?
   What are the tools that the Fed can use to adjust the interest rate? For full credit, list both conventional and unconventional tools.
3. c) Illustrate effect of the rate cut on your diagrams. Comment on how and why key macroeconomic variables change, if any.
4. d) Next, U.S. Congress is concerned by a record-high public debt level and decides to cut funding of military and national parks. Illustrate effect of these actions on the same ISLM and ADAS diagrams that you draw above and label the new equilibrium. Describe how and why the new equilibrium is different from the previous equilibrium.
5. e) If U.S. households spend 75% of every extra dollar of income they earn, how much would the national income change if the Congress cuts spending in Part (d) by $125 billion per year? Please show your calculations.
6. f) Suppose the Congress considers to replace the spending cut from Part (d) with a tax hike. How much should taxes be raised to achieve the same effect on national income as in Part (e)? Show your calculations.
7. g) Please compare and contrast effects of government spending cuts and tax hikes.