What is the equilibrium level of income

Assignment Help Macroeconomics

Reference no: EM131892966

Assignment: Intermediate macroeconomics

1. Suppose the economy is described by the following equations:

Y = C + I + G
C = 100 + .75(Y-T)
T = 100
G = 150
I = 125

a. What is the equilibrium level of income?

b. At the equilibrium level of income, is Government running a surplus or deficit?

c. Assume the full-employment level income is $1500. (i) How would you characterize this economy i.e. below or above full-employment? Suppose you are asked to recommend policies to improve the state of economy. (ii) What is the appropriate change in G? (iii) What will happen to government budget position is such a policy is enacted.

d. Instead of a change in government expenditure, a change in taxes could be advocated. (i)What is the appreciate change in taxes, and what will happen to government budget

Assignment 2

Use the following model

Y = C + I + G
C = Co + b(Y-T)
I =Io + Iy - IrR
G =Go
T =To
Md = Lo - LrR + LyY
Ms = Mo

Where C0 = Autonomous consumption
b= MPC,
Iy= income sensitivity of investment (Income elasticity of investment)
Ir= interest elasticity of investmen
Lr= interest elasticity of money demand
Ly= income elasticity of money demad
I= investment, G= Government spending, T = Taxes
R= interest rate
Y= GDP
1. Derive IS equation for model
2. Find the slope of the IS curve
3. Find the intercept of the IS curve
4. Derive LM equation for this model
5. Find the slope of the LM curve
6. Find the intercept of the LM curve

If
Co =200
b =0.5
Io =150
Iy =0.25
Ir = 1,000
Go =100
To =100
Lo =200
Mo =340
Ly =0.2
Lr =1,000

1. Find IS curve equation
2. Find LM curve equation
3. Find equilibrium Y and R.

Reference no: EM131892966

Questions Cloud

The productivity of the employees to minimize labor cost : Organizations have been implementing telematic, ODesk etc to monitor the productivity of the employees to minimize labor cost.

Compare and contrast the bradshaw rock paintings : Compare and contrast the Bradshaw rock paintings to other rock and cave paintings from other parts of the world. What are the similarities and differences?

Describe five policies that can help ward off the issues : Name and describe five policies that can help ward off these types of security issues.

Photograph by shirin neshat from the women of allah : The photograph by Shirin Neshat from the Women of Allah series known as Allegiance with Wakefulness is a powerful image.

What is the equilibrium level of income : What is the equilibrium level of income? At the equilibrium level of income, is Government running a surplus or deficit?

Inductive and deductive arguments : In this assignment, you will apply key concepts covered in the module readings. You will identify the component parts of arguments and differentiate between var

Can you think of any organizations that use it exceptionally : Organizations are continuing to incorporate use of blogs and social media. Can you think of any organizations that use it exceptionally well?

Discuss the predominant needs : Think about the best (or worst) supervisor you have had, either as a volunteer or a non profit staff member. Do you think that individual subscribed.

What can the hr department do to ensure its effectiveness : What does an organization need to do to ensure an effective HR department? What can the HR department do to ensure its effectiveness?

User Account

All Pages