Using the 4-quadrant diagram, derive graphically the LM schedule given different slopes of the: (a) money demand for speculation; and (b) money demand for transaction and precautionary purposes.
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KEYNESIAN MACROECONOMICS ( THE ROLE OF AGGREGATE DEMAND Derive and compare the mutipliers for two-sector, three sector and four-sector economies Assume a 2 Suppose that for a particular economy C 2500 T-2500 G 2500 3000 a) Determine the equlbrium income and show it graphicaly Detemine thegovemment budget b) Has the economy achieved ful employment equilibrium income a employment is 350007 Whr )taxes are reduced? What is the new budget and the new funcion forax Show the outcomes graphically C- 200...
Consider the following economy with: Real Money demand 〖 (M/P)〗^d = – 12 R + 0.38 Y Real Money supply (M^s/P)= 4510 Derive the LM curve Derive the LM curve when the money supply increases by 680. Derive the LM curve when money supply decreases by 12% Compare the LM curves from a, b and c by graphing them using any graphing tool (excel preferably). Comment on the differences. Find the value of money demanded when income Y = 15,000...
Real interest rate, r (%) Derive the LM curve graphically given the money market diagram below Real interest rate, r (%) MS 14 14 12 MD(Y $16,000) MD(Y $12,000) 50 110MD(Y $8,000 0 40 80 120 160 200 240 Real money supply and real money demanc 1.) Use the point drawing tool to plot three points, one for each level of real GDP Properly label each point. 0 2 4 6 8 10 12 14 16 18 20 Real GDP,...
IS/LM: Use the same setup as #1, but now Investment spending is a function of the real interest rate: I = 10000 – 50000r. Government purchase are now $1200b (makes for nicer numbers). Money demand in the economy is MD= (0.01Y – 800r)P + o. Assume the current money supply is $1400b, the price level/CPI is 100, and there are no money demand shocks to worry about (o = 0). a) Derive the IS curve and the LM curve for...
Suppose that people in an economy want to hold for transaction purposes an amount of money equal to one-fourth of national income. The following table shows the combined amounts of money people want to hold for precautionary and speculative purposes. INTEREST RATE AMOUNT OF MONEY DEMANDED 12% $80 10 100 8 120 6 140 4 160 2 180 (a) If national income is $400 and the interest rate is 10 percent, what is the total amount of money people will...
OY 10. By referring to Figure 7-1, an increase in the money stock a shifts the LM schedule to the right from LMoto LM b shifts the LM schedule to the left from LMo to LM e leaves the LM curve unchanged at LM. d. shifts neither the IS nor the LM schedule. 11. Changes in all of the following shift the LM curve except a. the price level. b. income. c. the money supply. d. money demand. e. all...
Suppose that people in an economy want to hold for transaction purposes an amount of money equal to one-fourth of national income. The following table shows the combined amounts of money people want to hold for precautionary and speculative purposes. INTEREST RATE AMOUNT OF MONEY DEMANDED 12% $80 10 100 8 120 6 140 4 160 2 180 (a) If national income is $400 and the interest rate is 10 percent, what is the total amount of money people will...
4. If the interest sensitivity of the demand for real money (the absolute inverse slope, or flatness of the demand curve for real money, b) were higher, would the absolute inverse slope of the LM curve be higher as well?
On a diagram with the interest rate on the vertical axis and the quantity of money demanded on the horizontal axis, how can the total demand for money be obtained? Select one: A. The asset and transaction demands are unrelated and therefore cannot be added or subtracted. B. By adding the transactions and the asset demand for money horizontally. C. By subtracting the transactions demand from the asset demand for money vertically. D. By adding the transactions and the asset...
1. Use the Keynesian cross model and show graphically in which direction will equilibrium level of income (or output) change. For each of the following, write down the formula for the size of the change of income (i.e. write down the formula for ∆Y): (i) An increase in government purchases (ii) An increase in taxes (iii) An increase in government purchase and an increase in taxes of equal amount (Nb: You must draw a SEPARATE graph for parts (i) and...