Solve for the equilibrium interest rate

Assignment Help Econometrics
Reference no: EM131132205

Consider the following IS-LM model:

1312_355191f3-5122-4ea8-a302-271e06f738f3.png

a. Derive the IS relation. (Hint: You want an equation with Y on the left side and everything else on the right.)

b. Derive the LM relation. (Hint: It will be convenient for later use to rewrite this equation with i on the left side and everything else on the right.)

c. Solve for equilibrium real output. (Hint: Substitute the expression for the interest rate given by the LM equation into the IS equation and solve for output.)

d. Solve for the equilibrium interest rate. (Hint: Substitute the value you obtained for Y in part (c) into either the IS or LM equations and solve for i. If your algebra is correct, you should get the same answer from both equations.)

e. Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G.

f. Now suppose that the money supply increases to M/P = 1,840. Solve for Y, i, c, and T, and describe in words the effects of an expansionary monetary policy.

g. Set M/P equal to its initial value of 1,600. Now suppose that government spending increases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, i, and C.

Reference no: EM131132205

Questions Cloud

Which of the following statements is correct concerning : Which of the following statements is correct concerning changes from year 1 to year 2 at Tripe Corp? Despite favorable changes in the tax rate return on net operating assets has decreased . Despite favorable changes in net operating asset utilization..
Illustrate the effect of such a policy mix on output : In 2001, the Fed pursued a very expansionary monetary policy. At the same time, President George W. Bush pushed through legislation that lowered income taxes.
Erikson theorized that a negative identity is one that : Erikson theorized that a negative identity is one that: - is based on little exploration of choices- represents the opposite of what is valued by one's parents - is in ìtime-out.
What surprised you about your use of technology : What surprised you about your use of technology and the kinds of technology you use? From the moment you wake up until you go to bed, you interact with helpful machines.
Solve for the equilibrium interest rate : Set M/P equal to its initial value of 1,600. Now suppose that government spending increases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, i, and C.
Describe a disaster that would require database recovery : Describe a disaster that would require database recovery and discuss your thoughts on preparing for and recovering from that disaster.
How are decision trees utilized in healthcare management : How are decision trees utilized in healthcare management? Discuss the three key parts of any decision and provide at least one specific example of how decision trees relate to healthcare management decisions. Your response should be at least 200 word..
Relationship between salesperson and customer : Describe the typical relationship between salesperson and customer looking for life insurance . Describe the appropriate salesperson’s attitudeand appearance. Describe the methods used to strengthen a long-term relationship for repeats and referrals ..
How would you measure the value of work at home in gdp : Calculate measured employment and unemployment and the measured labor force for each economy. Calculate the measured unemployment rate and participation rate for each economy. In which economy is measured GDP higher?

Reviews

Write a Review

Econometrics Questions & Answers

  Design a simple econometric research project

Design a simple econometric research project

  Multiplicative decomposition method

Multiplicative decomposition method

  Market for cigarettes

The Australian government administers two programs that affect the market for cigarettes.

  Solve the forecast model

Solve the forecast model

  What are the marginal abatement cost functions

What are the marginal abatement cost functions for each of the two areas? Calculate the loss in the two areas due to over-control (for the rural area) and under-control (for the urban area).

  Write the t statistic for testing the null hypothesis

Explain why this model violates the assumption of no perfect collinearity.  Write the t statistic for testing the null hypothesis

  What is economics system

What is economics system? What are the types of economics system? Briefly explain each type of economics system by giving examples of nations that are close to each type

  Multiple choice questions related to market concentration

Determine when a competitively produced product generates negative externalities in production, the industry will,

  Calculating number of units produced by firm

Assume a company has the following production function: Q = 100 K.5 L1 . Currently, the company hires 1,000 workers and employs 100 units of capital.

  Question about mobile commerce

M-commerce also known as mobile commerce is being lumped in with several strategic internet plans. Explain some of the industries that are likely to use mobile commerce and how it is working for them.

  Calculating the average days past due and average flow time

Auto Data manufactures custom engineering testing machine. The following 5-orders are currently in the design department:

  Mechanism of an english auction and second price auction

Briefly discuss the difference between mechanism of an oral or English auction and a Vickrey or second price auction.

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!

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