1 suppose that the following equations describe an economy

Assignment Help Macroeconomics

Reference no: EM13375359

1. Suppose that the following equations describe an economy (C, I, G, T, and Y are measured in billions of dollars and r is measured in percent)

435_value of the government purchase multiplier.png

a. Derive the equation for the IS curve

b. Derive the equation for the LM curve

c. Now express both the IS and LM equations in terms of r

d. Use the equations from Parts a and b to calculate the equilibrium levels of real output Y, the interest rate r, planned investment I, and consumption C.

e. At the equilibrium level of real output Y, calculate the value of the government budget surplus

f. Suppose that G increases by 36 to 386. Derive the new IS and LM equations

g. Using the information from Part f, calculate the new equilibrium levels of real output Y, the interest rate r, planned investment I, and consumption C.

2. Explain why each of the following statements is true. Discuss the impact of monetary and fiscal policy in each of these special cases.

a. If investment does not depend on the interest rate, the IS curve is vertical.

b. If money demand does not depend on the interest rate, the LM curve is vertical

c. If money demand does not depend on income, the LM curve is horizontal

d. If money demand is extremely sensitive to the interest rate, the LM curve is horizontal.

Reference no: EM13375359

Questions Cloud

1explain why in a perfectly competitive market the firm is : 1explain why in a perfectly competitive market the firm is a price taker. why cant the firm choose the price at which

Kellys boutique has several questions for you that excel : kellys boutique has several questions for you that excel can help answer. kelly is planning for the future and would

You have just inherited 100000 from your rich uncle sam : you have just inherited 100000 from your rich uncle sam. being the conservative sort you rush to your local bank and

Directions answer all five questions please submit your : directions answer all five questions. please submit your work in word or pdf formats only. you can submit an excel file

1 suppose that the following equations describe an economy : 1. suppose that the following equations describe an economy c i g t and y are measured in billions of dollars and r is

Just about everyone agrees that there is a legitimate and : just about everyone agrees that there is a legitimate and important role for government in business. where the

1 a suppose velocity is stable what would the federal : 1. a. suppose velocity is stable. what would the federal reserve need to know in order to keep output at its natural

1nbspnbspnbspnbspnbsp production possibility frontiers : 1.nbspnbspnbspnbspnbsp production possibility frontiers studying or socializing?nbspa. nbspdraw a production

Many critics however contend that the american recovery and : many critics however contend that the american recovery and reinvestment act of 2009 were not effective at all except

User Account

All Pages