question 1

Suppose

C=C_a+cY^(d ) (where Y^d=Y-T),

I=I_a-ir,

G=G_a+gY,

T=T_a+tY,

K=K_a+tY,and

L=L_a-ir.

Calculate the government expenditure multiplier, the lump-sum tax multiplier, and the balanced budget multiplier. Explain how the efficacy of the fiscal policy is affected by the slope of the speculative demand for money.

Question 1 Suppose C = Cq + cyd (where Yd = Y - T), I = la - ir, G = Ga + gY, T = Ta+ ty, K = Ka + tY, and L = La - ir. Calculate the government expenditure multiplier, the lump-sum tax multiplier, and the balanced budget multiplier. Explain how the efficacy of the fiscal policy is affected by the slope of the speculative demand for money.Question: How does the economy move toward the equilibrium if it starts from point D (which represents a disequilibrium position)? Support your answer graphically. LM IS Y Y*