1.It is known that L1 = 0.25 Y and L2 = 100 - 400r while M = 400.

a. Discover LM functions and curves

b. What does Y change if people tend to reduce their desire to

consume and keep watch

to 0.2Y while the interest remains 10%

c. What does Y change if the central bank increases its money s

upply to 500 while the

interest is considered to be 20%.

5.If known:

Consumption Function: C = 200 + 0.60Yd

Tax: T = - 300 + 0.25Y

Investment Function: I = 150 - 600r

Disposable income: Yd = Y - T

Government expenditure: G = 100

Equilibrium: Y = C + I + G

a. Discover IS functions and curves

b. What is the magnitude of Y and r on the balance of IS and LM (from problem 3a)

6.Is known

- Consumption: C = 500 + 0.60Y

- Tax of 20% of income (T = 0.20Y)

- Investment: I = 500,

- Government Expenditure G = 1000

- Export: X = 1000, and Import is 15% of National Income

(M = 0.15Y)

- National income to be reached 6,000

a. National income (Y) on balance

b. To achieve full employment balance

- How much tax is lowered

- How much was increased government spending

c. Export and import balance

d. How much additional national income if there is an additional export of 500