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Use the relevant set of equations to derive the IS curve and graph it in the...
Which equation represents the LM curve?
Consider an economy with the given equations. • Y=C+I+G • C = 88 +0.6(Y-T) • I = 110 - 10r •(M/P)d = Y - 15r • G=560 • T = $30 • M = $1200 • P = 3.0 Use the relevant set of equations to derive the LM curve. Move points A and B to graph the LM curve.Which equation represents the LM curve?
Consider the economy of Wiknam. The consumption function is given by f. With the initial values...
Consider the economy of Wiknam. The consumption function is given by f. With the initial values for monetary and fiscal policy, suppose that the price level falls from 5 to 3. What happens ? What are the new equilibrium interest rate and level of income? C = 250+ 0.6(Y-T). The investment function is The LM curve shifts to the by about 383.33. I = 100-20r. What are the new equilibrium interest rate and level of income? The money demand function...
Derivation of the Aggregate Demand Curve Suppose the economy of Y is described by the following...
Derivation of the Aggregate Demand Curve Suppose the economy of Y is described by the following equations: Consumption: C = 750 + 0.60 Yd where Ydrefers to disposable (post-tax) income. Taxes: T = 300 Government Expenditure: G = 30+0.2Y Investment: I = 400 -2000r Money Demand: L(r,Y) = Y – 10,000r Nominal Money Supply :Ms=$12000 Price Level P1=$3 Calculate the tax multiplier in Y Derive(sketch) the IS curve for Y. Derive(sketch) the LM curve for Y Solve for the equilibrium...
The following equations describe an economy. Y=C+I+G C=50+0.75*(Y-T) I=150-10r (M/P)d=Y-50r G=250 T=200 M=3,000 P=4 Identify each...
The following equations describe an economy. Y=C+I+G C=50+0.75*(Y-T) I=150-10r (M/P)d=Y-50r G=250 T=200 M=3,000 P=4 Identify each of the variables, and briefly explain their meaning. From the above list, use the relevant set of equations to derive the IS curve. Graph the IS curve on an appropriately labeled graph. From the above list, sue the relevant set of equations to derive the LM curve. Graph the LM curve on the same graph you used in part b). What are the equilibrium...
Consider the economy of Wiknam. The consumption function is given by C = 250+ 0.6(Y-T). a....
Consider the economy of Wiknam. The consumption function is given by C = 250+ 0.6(Y-T). a. Government purchases and taxes are both 100. In the accompanying diagram, graph the IS curve for r ranging from 0 to 8 by dragging and dropping the end points to the correct locations b. The money supply M is 2,875 and the price level Pis 5. In the accompanying diagram, graph the LM curve for r ranging from 0 to 8 by dragging and...
Assume that the following equations summarize the structure of an economy. Answer the following questions: ...
Assume that the following equations summarize the structure of
an economy.
Answer the following questions:
(a) What is the equation of the IS curve?
(b) What is the equation of the LM curve?
(c) What is the equilibrium real output?
(d) What is the equilibrium interest rate?
(e) What is the level of saving at equilibrium?
What is the level of planned investment at equilibrium?
Determine whether leakages equal injections at
equilibrium.
Assume that r...
Draw a planned aggregate expenditure curve for an economy where autonomous expenditure is $200 billion and...
Draw a planned aggregate expenditure curve for an economy where autonomous expenditure is $200 billion and the marginal propensity to consume is equal to 0.50. Plot values for Actual Aggregate Expenditure' of $100, $200, $300, $400, $500, and $600. Instructions: Use the graphing tool to draw the planned aggregate expenditure curve by plotting points at each level of output (Y) starting with zero and ending with 500. Planned Aggregate Expenditure (PAE, billions of dollars) PAE = Y 500 Tools 450...
f. If P increases and M is constant, does the LM curve shit upward and to...
f. If P increases and M is constant, does the LM curve shit upward and to the left or downward and to the right? 2. IS-LM Model (20 points) Assume that an economy is characterized by the following equations T 600; G 500, 1-800-(50/3)r, M 1200, P M0.SY-50 (1) write the IS curve for the economy, expressing Y as a function of r· (3 points) (2). Write the LM curve for the economy, expressing r as a function of Y....
Use the following graph, which shows an aggregate demand curve, to answer the next question, 250...
Use the following graph, which shows an aggregate demand curve, to answer the next question, 250 200 150 100 AD 0 500 600 700 800 Real GDP ($B) If the price level decreases from 200 to 100, the real output demanded will Multiple Cholce Increase by $800 billlon Increase by $200 billion decrease by $600 billion decrease by $200 billion
A small open economy is described by the following set of equations: C = 300 +...
A small open economy is described by the following set of equations: C = 300 + 0.6(Y − T) I = 700 − 80r NX = 200 − 50ε G = T = 500 (Balanced Budget) (M/P)^d = Y − 200r M = 3, 000 P = 3 r ∗ = 5 (a) Derive and graph the IS∗ and LM∗ curves. (b) Calculate the equilibrium exchange rate, income and net exports. (c) Assume a floating exchange rate. Calculate what happens...
Consider an economy with the given equations. • Y=C+I+G • C = 88 +0.6(Y-T) • I = 110 - 10r •(M/P)d = Y - 15r • G=560 • T = $30 • M = $1200 • P = 3.0 Use the relevant set of equations to derive the LM curve. Move points A and B to graph the LM curve.Which equation represents the LM curve?
Consider the economy of Wiknam. The consumption function is given by f. With the initial values for monetary and fiscal policy, suppose that the price level falls from 5 to 3. What happens ? What are the new equilibrium interest rate and level of income? C = 250+ 0.6(Y-T). The investment function is The LM curve shifts to the by about 383.33. I = 100-20r. What are the new equilibrium interest rate and level of income? The money demand function...
Consider the economy of Wiknam. The consumption function is given by C = 250+ 0.6(Y-T). a. Government purchases and taxes are both 100. In the accompanying diagram, graph the IS curve for r ranging from 0 to 8 by dragging and dropping the end points to the correct locations b. The money supply M is 2,875 and the price level Pis 5. In the accompanying diagram, graph the LM curve for r ranging from 0 to 8 by dragging and...
Assume that the following equations summarize the structure of
an economy.
Answer the following questions:
(a) What is the equation of the IS curve?
(b) What is the equation of the LM curve?
(c) What is the equilibrium real output?
(d) What is the equilibrium interest rate?
(e) What is the level of saving at equilibrium?
What is the level of planned investment at equilibrium?
Determine whether leakages equal injections at
equilibrium.
Assume that r...
Draw a planned aggregate expenditure curve for an economy where autonomous expenditure is $200 billion and the marginal propensity to consume is equal to 0.50. Plot values for Actual Aggregate Expenditure' of $100, $200, $300, $400, $500, and $600. Instructions: Use the graphing tool to draw the planned aggregate expenditure curve by plotting points at each level of output (Y) starting with zero and ending with 500. Planned Aggregate Expenditure (PAE, billions of dollars) PAE = Y 500 Tools 450...
f. If P increases and M is constant, does the LM curve shit upward and to the left or downward and to the right? 2. IS-LM Model (20 points) Assume that an economy is characterized by the following equations T 600; G 500, 1-800-(50/3)r, M 1200, P M0.SY-50 (1) write the IS curve for the economy, expressing Y as a function of r· (3 points) (2). Write the LM curve for the economy, expressing r as a function of Y....
Use the following graph, which shows an aggregate demand curve, to answer the next question, 250 200 150 100 AD 0 500 600 700 800 Real GDP ($B) If the price level decreases from 200 to 100, the real output demanded will Multiple Cholce Increase by $800 billlon Increase by $200 billion decrease by $600 billion decrease by $200 billion
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