The Nueva Country
Finn develops a strong addiction to AriZona Iced Teas. He starts purchasing high amounts of Teas from Gastationia, drinking the vast majority of them and reselling the rest to Nuevan students. How does this affect the Nuevan GDP?
This increases the Nuevan GDP, as the importing act is a net zero to GDP*, and the reselling act directly increases the GDP.
*Y = C + I + G + X - M, and the importing cost is added in C and subtracted in M, so it is a net zero.
Eddy starts selling his illegal hand-drawn pictures of Attack On Titan characters, which causes the government of Nueva to increase law enforcement. How does this affect real money demand?
The real money demand increases with income, which increases with the increased consumption as well as increased government spending.
Ben starts a muscle-losing program, which leads to a significant decrease in the purchases of food in Nuevan markets. How does this affect interest rates?
The decrease in the purchase of goods would lower income, which would lower the money demand, causing the central bank to sell back bonds, lowering interest rates.
The Nuevan government decides to commission and air a propaganda film in order to secure Aaron’s victory in the StuCo race. The public becomes attached to the media, spending on merch as they become obsessed with it. How does this affect GDP?
GDP increases. G↑ and c0↑ moves IS right, which moves equilibrium up based on LM, which makes Y↑.
The Nuevan people have assembled to boycott credit cards, resorting to using cash in order to avoid paying taxes to the Student Council. At this same time, the Nuevan government has been eyeing the bonds market. Is this a good time for them to buy bonds?
Yes, i increases. T↓ moves IS curve right and Md↑ moves LM curve up, moving the equilibrium up, which makes i↑.