Question
1.Answer the following questions assuming known IS and LM curves. Derive the associated aggregate demand ( AD ) curve. (5 marks) Why does it have
1.Answer the following questions assuming known IS and LM curves.
- Derive the associated aggregate demand (AD) curve. (5 marks)
- Why does it have a negative slope? (5 marks)
- What is the effect of an increase in taxes on the AD curve? (5 marks)
- What is the effect of a decrease in real money balances on the AD curve? (5 marks)
2.Assume the economy starts at the natural level of output. Using AS-AD analysis, compare the adjustment in the economy to an increase in government spending under fixed exchange rates with
- downwardly rigid wages and prices.(10 marks)
- competitively determined wages and prices.(10 marks)
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Business Driven Information Systems
Authors: Paige Baltzan, Kathy Lynch, Peter Blakey
2nd Edition
978-0077364120, 0077364120
