Consider the following IS-LM model: C= 300+ 0.5YD, I=200+0.3Y-2000i, G=500, T=300 (a) Derive the IS relation....
Consider the following IS-LM model: C= 300+ 0.5YD, I=200+0.3Y-2000i, G=500, T=300
(a) Derive the IS relation. (The relationship of Y and i).
(b) The central bank sets an interest rate of 10 %. How is that decision represented in the equations? (LM relation)
(c) What is the level of real money supply when the interest rate is 10 %? Use the expression: (M/P) = 1.5.Y − 4000.i
(d) Solve for the equilibrium values of C and I.
(e) Suppose that the central bank cuts the interest rate to 8 %. Graphically show this change on IS-LM curves. What is the effect of this policy on Y, I ,C? Is this an expansionary monetary policy or contractionary policy?
(f) Let’s return to the initial situation and assume that the interest rate is set at 10%. Now suppose that taxes increase to 500. Graphically illustrate this change in IS-LM curves. What is the effect of this policy on Y, I ,C? Is this an expansionary fiscal policy or contractionary policy?
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Consider the following IS-LM model: C= 300+ 0.5YD,
I=200+0.3Y-2000i, G=500, T=300
(a) Derive the IS relation....
1. Consider the following numerical example of the IS-LM model: C = 100 + 0.3YD I...
1. Consider the following numerical example of the IS-LM model: C = 100 + 0.3YD I = 150 + 0.2Y - 1000i T = 100 G = 200 i = .01 (M/P)s = 1200 (M/P)d = 2Y - 4000i a. Find the equation for aggregate demand (Y). b. Derive the IS relation. c. Derive the LM relation if the central bank sets an interest rate of 1%. d. Solve for the equilibrium values of output, interest rate, C and I....
please help me Consider the following numerical example of the IS-LM model: C = 100 +...
please help me Consider the following numerical example of the IS-LM model: C = 100 + 0.3YD I = 150 + 0.2Y - 1000i T = 100 G = 200 i = .01 (M/P)s = 1200 (M/P)d = 2Y - 4000i Find the equation for aggregate demand (Y). Derive the IS relation. Derive the LM relation if the central bank sets an interest rate of 1%. Solve for the equilibrium values of output, interest rate, C and I. Expansionary monetary...
19) Consider the following IS LM model: C= 300 + 25YD I = 150 + 25...
19) Consider the following IS LM model: C= 300 + 25YD I = 150 + 25 Y - 1,000 i G = 350 T= 100 i*=.02 1. Derive the Irelation. Solve for equilibrium real output. 2. Solve for equilibrium values on C and I, and verify the value you obtained for Y by adding C, I, and G. 3. Now suppose that the central bank increases the interest rate to 8%. How does this change the LM curve? Solve for...
Consider the typical IS-LM set-up characterized by the following equations: IS : Y = C(Y -...
Consider the typical IS-LM set-up characterized by the following equations: IS : Y = C(Y - T) +I(Y, i) +G LM : M P = Y.L(i) Suppose the economy is in a short run equilibrium. The government decides to perform contractionary fiscal policy by increasing taxes. (a) (5 points) Draw the effect this policy will have in the IS-LM framework (1 graph, Method 3). Label all axes, curves, the new and the old equilibrium. (b) (5 points) Using your graph...
please type your answer to be easy to read and understand! Consider the typical IS-LM set-up...
please type your answer to be easy to read and understand!
Consider the typical IS-LM set-up characterized by the following equations: IS : Y = C(Y - T) +I(Y. i) +G M LM: P =Y L(i) Suppose the economy is in a short run equilibrium. The government decides to perform contractionary fiscal policy by increasing taxes. (a) (5 points) Draw the effect this policy will have in the IS-LM framework (1 graph, Method 3). Label all axes, curves, the new...
a)Draw the effect this policy will have in the IS-LM framework (1 graph, Method 3). Label...
a)Draw the effect this policy will have in the IS-LM framework
(1 graph, Method 3). Label all axes, curves, the new, and the old
equilibrium.
b)Using your graph from part (a), describe the equilibrium change
in 4 variables listed below following an increase in taxes:
1. Output:
2. The interest rate:
3. Consumption:
4. Investment:
c)Following the increase inT, suppose the Fed implements
contractionary monetary policy. Draw the effects of the Fed’s
reaction in the IS-LM framework (1 graph, Method...
4. Consider the following numerical example of the IS-LM model C 0.8(Y T); I 1520 240i;...
4. Consider the following numerical example of the IS-LM model C 0.8(Y T); I 1520 240i; T 150 0.25Y; G 200; (M/P)s 1800 (M/P)D 300 0.75Y 300i a. Derive the IS and LM relation. (10%) b. Solove for the equilibrium values of output, interest rate, disposable income.(10%) 400 and T becomes T 350 0.25Y c. Suppose that G rises by 200 to G = Simultaneously, the central bank decreases money supply to 1500. Calculate what will happen to Y* and...
Suppose the economy is operating at full potential in the following IS-LM-PC model: C 200+0.25*Y ...
Suppose the economy is operating at full potential in the following IS-LM-PC model: C 200+0.25*Y I-150 0.25*Y-1000 i G = 150 T-200 i-0.05 a) Solve for the equilibrium level of output. What is the level of potential output? b) Solve for the equilibrium values of C and I c) Suppose in period t+1 there is an increase in consumer confidence to 0.5 and an increase in taxes to 300. Solve for the new equilibrium levels of Y, C and I...
Just e) f) and g) if possible please Question 5: The IS-LM model Consider the following...
Just e) f) and g) if possible please
Question 5: The IS-LM model Consider the following IS-LM model: Consumption: C = 200 +0.25YD Investment: I=150 + 0.25Y - 10001 Government spending: G=250 Taxes: T=200 Money demand: L(i,Y)-2Y - 8000 Money supply: Ms /P=1600 (a) Derive the equation for the IS curve. (Hint: You want an equation with Y on the lefthand side and all else on the right) (b) Derive the equation for the LM curve. (Hint: It will be...
Consider the following IS-LM model, in which the central bank targets an interest rate of i...
Consider the following IS-LM model, in which the central bank targets an interest rate of i C 11500.3YD 1 = 2000 + 0.3Y-8000i G 2000 T 1500 = 4Y-16,000i -= 0.02 c) Solve for value of the real money supply that the central bank must set to achieve its interest rate target, and the equilibrium level of output, by combining the IS and LM relations. Compute the values of equilibrium consumption, investment, and money demand. If the GDP deflator is...
19) Consider the following IS LM model: C= 300 + 25YD I = 150 + 25 Y - 1,000 i G = 350 T= 100 i*=.02 1. Derive the Irelation. Solve for equilibrium real output. 2. Solve for equilibrium values on C and I, and verify the value you obtained for Y by adding C, I, and G. 3. Now suppose that the central bank increases the interest rate to 8%. How does this change the LM curve? Solve for...
Consider the typical IS-LM set-up characterized by the following equations: IS : Y = C(Y - T) +I(Y, i) +G LM : M P = Y.L(i) Suppose the economy is in a short run equilibrium. The government decides to perform contractionary fiscal policy by increasing taxes. (a) (5 points) Draw the effect this policy will have in the IS-LM framework (1 graph, Method 3). Label all axes, curves, the new and the old equilibrium. (b) (5 points) Using your graph...
please type your answer to be easy to read and understand!
Consider the typical IS-LM set-up characterized by the following equations: IS : Y = C(Y - T) +I(Y. i) +G M LM: P =Y L(i) Suppose the economy is in a short run equilibrium. The government decides to perform contractionary fiscal policy by increasing taxes. (a) (5 points) Draw the effect this policy will have in the IS-LM framework (1 graph, Method 3). Label all axes, curves, the new...
a)Draw the effect this policy will have in the IS-LM framework
(1 graph, Method 3). Label all axes, curves, the new, and the old
equilibrium.
b)Using your graph from part (a), describe the equilibrium change
in 4 variables listed below following an increase in taxes:
1. Output:
2. The interest rate:
3. Consumption:
4. Investment:
c)Following the increase inT, suppose the Fed implements
contractionary monetary policy. Draw the effects of the Fed’s
reaction in the IS-LM framework (1 graph, Method...
4. Consider the following numerical example of the IS-LM model C 0.8(Y T); I 1520 240i; T 150 0.25Y; G 200; (M/P)s 1800 (M/P)D 300 0.75Y 300i a. Derive the IS and LM relation. (10%) b. Solove for the equilibrium values of output, interest rate, disposable income.(10%) 400 and T becomes T 350 0.25Y c. Suppose that G rises by 200 to G = Simultaneously, the central bank decreases money supply to 1500. Calculate what will happen to Y* and...
Suppose the economy is operating at full potential in the following IS-LM-PC model: C 200+0.25*Y I-150 0.25*Y-1000 i G = 150 T-200 i-0.05 a) Solve for the equilibrium level of output. What is the level of potential output? b) Solve for the equilibrium values of C and I c) Suppose in period t+1 there is an increase in consumer confidence to 0.5 and an increase in taxes to 300. Solve for the new equilibrium levels of Y, C and I...
Just e) f) and g) if possible please
Question 5: The IS-LM model Consider the following IS-LM model: Consumption: C = 200 +0.25YD Investment: I=150 + 0.25Y - 10001 Government spending: G=250 Taxes: T=200 Money demand: L(i,Y)-2Y - 8000 Money supply: Ms /P=1600 (a) Derive the equation for the IS curve. (Hint: You want an equation with Y on the lefthand side and all else on the right) (b) Derive the equation for the LM curve. (Hint: It will be...
Consider the following IS-LM model, in which the central bank targets an interest rate of i C 11500.3YD 1 = 2000 + 0.3Y-8000i G 2000 T 1500 = 4Y-16,000i -= 0.02 c) Solve for value of the real money supply that the central bank must set to achieve its interest rate target, and the equilibrium level of output, by combining the IS and LM relations. Compute the values of equilibrium consumption, investment, and money demand. If the GDP deflator is...
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