Suppose that the equation for autonomous planned spending

Assignment Help Microeconomics

Reference no: EM13378031

Suppose that the equation for autonomous planned spending, Ap, Ap =6,200-200r and the value of the multiplier, k, is 2.5.

A. Derive the equation for the IS curve, Y=k*Ap. Graph for interest rates 0 & 8, with intervals of one-half of a percentage point.

B. Suppose the equation for the LM curve is Y=13500+100r. Use this equation to explain the level of income at which there is a zero lower bound on the federal funds rate, the interest rate that the Fed controls.

C. Graph the LM curve for interest rates between & 8 with intervals of one-half a percentage point.

D. Suppose that the term premium is 1.0 percentage point and the risk premium is 2.0 percentage points. Use the M curve with the zero lower bound and the term premium and risk premium to graph the LM curve for the government bond rate and the LM curve for the private bond rate at interest rates between 0 & 8, with intervals of one-half of a percentage point.

E. Use the graph of the IS curve and the three LM curves to explain what the equilibrium interest rates for the federal funds rate, the government bonds rate, and the private bond rate are and what the equilibrium level of income is.

Reference no: EM13378031

Questions Cloud

Texas instrument once announced a price for random-access : texas instrument once announced a price for random-access memories that wouldnt be available until two tears after the

Imagine you were studying marxism together with a friend : imagine you were studying marxism together with a friend and the friend said to you doesnt the labor theory of value

Suppose the ratio of deposits that banks hold in the form : suppose the ratio of deposits that banks hold in the form of reserves is 7 percent. suppose further that people want to

Given the following information for november 2010 calculate : given the following information for november 2010 calculate the amounts of m1 and m2 in november 2010. the amounts are

Suppose that the equation for autonomous planned spending : suppose that the equation for autonomous planned spending ap ap 6200-200r and the value of the multiplier k is 2.5.a.

You observe an olympic athlete in the long-jump suppose the : you observe an olympic athlete in the long-jump. suppose the distance of each jump is a random variable that follows a

1 in a market system well-defined property rights are : 1. in a market system well-defined property rights are important because theyreduce unnecessary investment. limit

1a positive statement is one which isderived by induction : 1. a positive statement is one which isderived by induction. derived by deduction. subjective and is based on

Suppose that the average prices of refrigerators have : suppose that the average prices of refrigerators have fallen over the past few years yet the refrigerator companies

User Account

All Pages