Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume the following unctions are for the goods market of a hypothetical economy: {1) I = 150- lr; {2) C=T+.8'r'd {3) T=50+0.25Y {4) G=13||Il Note:

image text in transcribed
Assume the following unctions are for the goods market of a hypothetical economy: {1) I = 150- lr; {2) C=T+.8'r'd {3) T=50+0.25Y {4) G=13||Il Note: '1' is income and r is the interest rate a) Derive the IS curve for this economy. 1:) Use appropriate scale to sketch the IS curve is part (a) above. c) Determine and interpret the slope of the IS curve in part a) above. d} Explain how a change in each of the following will affect the IS curve in part a) above: i) A balance budget increase in government expenditure of 61] units. ii} An increase autonomous consumption to 800 units iii) An increase in the interest sensitivity of investment to 20. iv) An increase in the marginal propensity to save to .025. v) A decrease in the marginal tax rate to 0.15

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

Microeconomics

Authors: Roger A. Arnold

12th Edition

1285738306, 978-1285738307

More Books

Students also viewed these Economics questions

Question

differentiate between good and bad ways of working hard;

Answered: 1 week ago

Question

Make eye contact when talking and listening

Answered: 1 week ago

Question

Do not go, wait until I come

Answered: 1 week ago

Question

Pay him, do not wait until I sign

Answered: 1 week ago