What is Fe line in economics?
FE line: The full employment line is a vertical line at the full employment level of output. The economy will produce at full employment level of output regardless of the real interest rate. At every point along the FE line the labor market is in equilibrium.Click to see full answer. Moreover, is LM Fe?As the…
FE line: The full employment line is a vertical line at the full employment level of output. The economy will produce at full employment level of output regardless of the real interest rate. At every point along the FE line the labor market is in equilibrium.Click to see full answer. Moreover, is LM Fe?As the name suggests, the IS-LM-FE model has three components. It looks at the conditions under which the economy reaches general equilibrium, a state of simultaneous equilibrium in the three key component markets of the economy: the labor market, the goods market, and the asset market.Additionally, what is the IS curve? The IS curve represents all combinations of income (Y) and the real interest rate (r) such that the market for goods and services is in equilibrium. This increase in Y shifts the desired savings curve down and right lowering the equilibrium real interest rate to 3%. Also asked, what determines the position of the Fe line? The position of the FE line is determined by the labor market and the production function. Labor supply and demand determine equilibrium employment. Using equilibrium employment in the production function gives the full-employment level of output. The FE line is vertical at that point.Why is money supply vertical line?The supply of money is a vertical line, suggesting the quantity of money is fixed at a level largely determined by the Fed. The vertical curve indicates the money supply decided by the Federal Reserve. At any interest rate above the equilibrium rate, there is an excess supply of money.
