Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

5. Consider the following numerical example of the IS-LM model: C = 100 + 0.3 YD I = 150 + 0.2Y 1000i T= 100 G=200

image text in transcribed

image text in transcribed
5. Consider the following numerical example of the IS-LM model: C = 100 + 0.3 YD I = 150 + 0.2Y 1000i T= 100 G=200 i= .01 (M/P)' = 1200 (M/P)" = 21! 4000i a. Find the equation for aggregate demand (Y). b. Derive the IS relation. c. Derive the LM relation if the central bank sets an interest rate of 1%. d. Solve for the equilibrium values of output, interest rate, C and I . e. Expansionary monetary policy. Suppose that the central bank increases money supply to 1 500. What is the impact of this expansionary monetary policy on the IS and LM curves? Find the new equilibrium values of output, interest rate, C and I. f. Expansionary fiscal policy. Suppose that the government increases its spending G to 300. What is the impact of this expansionary scal policy on the IS and LM curves? Find the new equilibrium values of output, interest rate, C and

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Math For Business And Finance An Algebraic Approach

Authors: Jeffrey Slater, Sharon Wittry

1st Edition

0077639626, 9780077639624

More Books

Students also viewed these Economics questions

Question

What other bills do I have to pay?

Answered: 1 week ago

Question

Always show respect for the other person or persons.

Answered: 1 week ago

Question

Self-awareness is linked to the businesss results.

Answered: 1 week ago