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Llana [10]
3 years ago
14

A financial crisis: Suppose the economy starts with GDP at potential, the real interest rate and the marginal product of capital

both equal to 3%, and a stable inflation rate of 2%. A mild financial crisis hits, that raises the risk premium from zero to 2%.
a.Analyze the effect of this shock in an IS/MP diagram.
b.What policy response would you recommend to the Federal Reserve? What would be the effect of this policy response on the economy?
c.How would your answer to part b) change if the financial crisis were very severe, raising the risk premium to 6%?
d.What other policy responses might be considered in this case?

Business
1 answer:
Masteriza [31]3 years ago
3 0

Answer

The answer and procedures of the exercise are attached in the following archives.

Explanation  

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.  

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Answer:

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A Journal entry for Brooks Incorporation on January 1, 2019 which is shown below

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Solution

Given that:

           JOURNAL ENTRY FOR BROOKS INCORPORATION

Date               General Journal Debit Credit

Jan 01 2019                Cash        90000

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