Reference no: EM13955975
Problem: In an economy, consumption is C = 30 + 1/2 (Y-T); investment is I = 25 - 110 i; tax revenue is T = 20; and government expenditure is G = 20. Y is the level of real output. The demand for real money balances, M/P, is Y i-1. The interest rate is set at 4% (i.e., i = 0.04) by the central bank. The price level, P, is constant at 1.
(a) Derive the equation of the IS curve and roughly sketch it in a diagram.
(b) Roughly sketch the LM curve, and show the short-run equilibrium.
(c) Compute the goods market multiplier.
(d) Compute the short-run equilibrium levels of output, consumption and investment.
(e) If the central bank raised the interest rate to 6%, compute the new level of output.
(f) If G rose to 25, and i remained at 6%, compute the new level of output.
Additional Information:
The given problem is belongs to Economics and the problem explains about deriving an equation of the IS curve and drawing a diagram.
|
Probability of randomly generating nine digits
: Assume that one of the subjects is randomly selected. Find the probability that the selected subject is not pregnant, given that the test was negative. I the result the same as the probability of a negative test result given that the selected subj..
|
|
How many oscillations the pendulum will make
: While the pendulum swings, the whole system moves vertically down at a rate of 1mm/min. Considering that the pendulum has a small amplitude, how many oscillations the pendulum will make when it has moved 1m distance downward?
|
|
What will the price be if preston follows its normal pricing
: On October 28, Fairview Construction Company asked Preston to deliver 6,000 cubic yards of concrete. The job will require driving 8,400 miles and 300 truck hours. What will the price be if Preston follows its normal pricing policy?
|
|
Construct a cash flow diagram to find the present worth
: Determine the present worth of a geometric gradient series with a cash flow - List the essential elements involved in decision making in engineering economic analysis.
|
|
Compute short-run equilibrium levels of output consumption
: Compute the short-run equilibrium levels of output, consumption and investment. If the central bank raised the interest rate to 6%, compute the new level of output.
|
|
Objectives of assessing interperiod equity
: The dual objectives of assessing interperiod equity and ensuring budgetary compliance may necessitate different accounting practices.
|
|
Write a paragraph explaining why net income
: Write a paragraph explaining why net income that is substantially higher than cash flow from operations may indicate manipulation of earnings.
|
|
What are these probabilities if he does not sample the fruit
: Determine the expected value of the right to sample. (Hint: If the merchant samples the fruit, what are the probabilities of accepting a Good box, accepting a Bad box, and not accepting the box? What are these probabilities if he does not sample t..
|
|
Determine the frequency of the wave
: A person lying on an air mattress in the ocean rises and falls through one complete cycle every 5.5 seconds. The crests of the wave causing the motion are 21.0 m apart. Determine the frequency of the wave.
|