User Account

All Pages

Derive the equations of the is and lm curves

Assignment Help Microeconomics
Reference no: EM133124241

Consider the IS-LM model with completely sticky goods prices in the SR closed economy. Suppose the consumption function is given by C=100+0.8*(Y-T) and the investment function is given by I=600-5000*r. G=800 and T=500. Money supply M=25000 and general price level P=5. The real money demand function is given by L(i,Y)=0.2Y/i. =2% in the Fisher equation.

  1. Derive the equations of the IS and LM curves and solve for the equilibrium real output, real interest rate, consumption and investment spending.
  2. Consider a one-time open market sales of bonds of 100 by the Bank of Canada (to a private bank). Suppose all private banks have the same reserve ratio of 4% and the general public's cash-to-deposit ratio is 0.

i. After all (infinite) rounds of "money creation/destruction", show the changes in the balance sheets of the private banking system, the Bank of Canada and the general public. By how much does the money supply increase/decrease?

ii. Use the IS-LM model with completely sticky goods prices to graph the impact of such open market sales in the SR closed economy. How will equilibrium real output, real interest rate, consumption and investment spending change? Explain. (DO NOT solve numerically.)

Reference no: EM133124241

Questions Cloud

Explain three types of risk assessment procedures : Explain three types of risk assessment procedures that Auditing standards indicate the auditor needs to perform
How much do intermediaries pay for one kilo of dried cacao : How much do intermediaries pay for one kilo of dried cacao?
Labour mobility and wage-price flexibility : Labour mobility and wage/price flexibility are needed for adjustment to temporary shocks in a mone- tary union. TRUE
What amount shall be reported as provision for lawsuit : An appropriate discount rate of 6% per year. The present value of 1 at 6% for one period is 0.9434. What amount shall be reported as provision for lawsuit
Derive the equations of the is and lm curves : Derive the equations of the IS and LM curves and solve for the equilibrium real output, real interest rate, consumption and investment spending.
Inconsistency model without economic shocks : Consider the time inconsistency model without economic shocks. Assume that the social cost of inflation so that the marginal social cost of inflation . Assume
Working at the reception desk in a large : You are working at the reception desk in a large, busy veterinary practice. The waiting room is full of people and pets as it is late in the day on Friday befor
Optimal strategy of development : "Balanced and unbalanced growth need not be conflicting and an optimal strategy of development should combine some elements of balance and unbalance." Discuss w
Economic relationship between these markets and sugar : The last part of this question looks at the likely impact of a tax on sugar- sweetened drinks on the market for non-sweetened, artificially sweetened or low- su

Reviews

Write a Review

Microeconomics Questions & Answers

  The free rider problem

Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.

  Failure of the super committee is good thing for economy

Some commentators have argued that the failure of the “Super committee” is good thing for the economy?  Do you agree?

  Case study analysis about optimum resource allocation

Case study analysis about optimum resource allocation: -  Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..

  Fixed cost and vairiable cost

Questions:  :   Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month?  Explain your choice.

  Problem - total cost, average cost, marginal cost

Problem - Total Cost, Average Cost, Marginal Cost: -  Complete the following table of costs for a firm.  (Note: enter the figures in the  MC   column  between  outputs of  0 and 1, 1 and 2, 2 and 3, etc.)

  Oligopoly and demand curve problem

Problem based on Oligopoly and demand curve,  Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another?

  Impact of external costs on resource allocation

Explain the impact of external costs and external benefits on resource allocation;  Why are public goods not produced in sufficient quantities by private markets?  Which of the following are examples of public goods (or services)? Delete the incorrec..

  Shifts in demand and movements along the demand curve

Describe the differences between shifts in demand and movements along the demand curve. What are the main factors which can shift the demand curve? Explain why they cause the demand curve to shift. Use examples and draw graphs to support your discuss..

  Article review question

Article Review Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:

  Long-term growth, international trade & globalization

Long-term Growth, International Trade & Globalization:- This question deals with concepts such as long-term growth, international trade and globalization. Questions related to trade deficit, trade surplus, gains from trade, an international trade sce..

  European monetary union (emu) in crisis

"Does the economic bailout of Spain and Greece spell the beginning of the end for the European Monetary Union (EMU)?"

  Development game “settlers of catan”

Read the rules of the game, the overview and the almanac for the Development Game "Settlers of Catan"

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd