Question
Assume that we have the following data: C=100+0.50Y Ip=100-20r Mt=0.10Y Ms=100-10r M=80 a. Build the IS-LM function. b. If we assume an increase in Investments
Assume that we have the following data:
C=100+0.50Y
Ip=100-20r
Mt=0.10Y
Ms=100-10r
M=80
a. Build the IS-LM function.
b. If we assume an increase in Investments by 100 units, calculate again the IS-LM functions.
c. The intersection of IS-LM functions defines four areas. Analyze the behavior of the markets for goods and money for each area.
Accurately described (graphically or verbally) the IS-LM functions.
Accurately describe (graphically or verbally) the shift of the IS-LM function when Investments increase by 100 units.
Describe each of the four areas defined by the IS-LM function and used atleast one example.
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