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Macroeconomics (sixth edition), by Olivier Blanchard David R. Johnson, Pearson, 2012. , page 105-106 Consider the...

Macroeconomics (sixth edition), by Olivier Blanchard David R. Johnson, Pearson, 2012. , page 105-106

Consider the following IS–LM model: C = 200 + .25YD I = 150 + .25Y - 1000i G = 250 T = 200 1M>P2d = 2Y - 8000i M>P = 1600

Q4. (f) Now suppose that the money supply increases to M/P = 1,840. Solve for Y, i, c, and T, and describe in words the effects of an expansionary monetary policy Use IS-LM model to demonstrate your answer.

(g), Set M/P equal to its initial value of 1,600. Now suppose that government spending increases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, i, and C.
Use IS-LM model to demonstrate your answer.

Q7. Policy mixes Suggest a policy mix to achieve each of the following objectives.

a. Increase Y while keeping i constant. Use IS-LM model to demonstrate your answer.

b. Decrease the fiscal deficit while keeping Y constant. What happens to i? To investment? Use IS-LM model to demonstrate your answer

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