Why income sensitivity of demand affect slope of lm curve

Reference no: EM13182019

A) Explain in words how and why the income sensitivity of the demand for real balances affect the slope of the LM curve. Think of the demand for real balances as L(r,Y)= eY-fr where e and f are positive constants.

B) What are the effects of a large spending multiplayer on the slope of the IS curve? Graphically show and verbally explain.

C) Graphically show the effects of an increase in government spending on output in the IS-LM model. Verbally explain (including a discussion of the movement from the old equilibrium to the new equilibrium; what is true at the disequilibrium?) Assume a closed economy so that Y= C+I+G. Does output increase by the same amount as in the simple Keynesian cross model? Why does it differ?

D) Seperately describe points that are below and above the IS curve.

Reference no: EM13182019

Questions Cloud

Reduction of automobile production : Ford Motor Company recently announced closings of a number of U.S. factories and a reduction of automobile production. The news media documented a rippling effect of this decision throughout the automobile parts industry. Ford Motor Company executive..

Republican party in particular : Was the north in general, and the republican party in particular, ever really commited to transforming the political, economic, and racial conditions of the south?

Wide range of life''s social roles and responsibilities : Describe at least three skills or personal capabilities that contribute to positive social development in a wide range of life's social roles and responsibilities.

Design problem : Des ign Problems, You are required to report on an operating medium to large underground mining operation. Included in your report should be all or most of the items listed below:Production Methods Development Requirements Plans and Sections, Roc..

Why income sensitivity of demand affect slope of lm curve : Explain in words how and why the income sensitivity of the demand for real balances affect the slope of the LM curve. Think of the demand for real balances as L(r,Y)= eY-fr where e and f are positive constants.B) What are the effects of a large s..

Which is more protable for hotel bethlehem : If Hotel Bethlehem can charge two separate prices for two separate blocks of guests, what are the two prices they charge? how many rooms do they ll at each price? If Hotel Bethlehem only charges one price, how many rooms do they ll? What price do t..

What is megabuss prot from price discriminating : What is Megabus's prot from price discriminating? If Megabus could not price discriminate, they would have to set one price for both students and non-students. What demand curve does Megabus face if they cannot price discriminate? What is Megabus'..

Any way in which oil price shocks could have been beneficial : All major nations had their currencies set at a fixed exchange rate with the American dollar, but the dollar was the only currency convertible into gold. Nixon's unilateral decision brought instability to the international monetary system from 197..

How the two economies respond differently to a boom : Explain how the two economies respond differently to a boom and to a slump. What are some factors that might influence the slope of the Phillips curve? Do you think the slope of the Phillips curve has changed over time in the U.S. economy? Consider..

User Account

All Pages