1. Consider the following economy: C = 3, I = 1.5, G = 2.65, T = 2,...
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Question:
1. Consider the following economy:
C = 3, I = 1.5, G = 2.65, T = 2, f = 0.5, d = 0.1, a = 0.8
a) Write the mathematical expression of the consumption function
b) Write the mathematical expression of the investment function
c) Find the IS curve and graph it
d) If r = 10, what is the level of Y in equilibrium?
e) Assume now that f = 1. Find the new IS curve
f) Which way did the curve shift and why?
2. Consider the following economy:
The IS curve: Y = 16-2r
The MP curve: r = 3+0.5pi
Derive the AD curve
3. Consider the following economy:
The MP curve: r = 2+0.5pi
The AD curve: Y = 20 - 0.25pi
Derive the IS curve
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date: