Log in
Economics
1
answer
1
watching
1,202
views

Assume that an economy is characterized by the following equations: C = 100 + (2/3)(Y - T), T = 600, G = 500, I = 800 - (50/3)r, Ms/P = Md/P = 0.5Y - 50r

a. Write the numerical IS curve for the economy, expressing Y as a numerical function of G, T, and r.

b. Write the numerical LM curve for this economy, expressing r as a function of Y and M/P.

c. (i) Solve for the equilibrium values of Y and r, assuming P = 2.0 and M = 1,200.

   (ii) How do they change when P = 1.0? Check by computing C, I, and G.

d. Write the numerical aggregate demand curve for this economy, expressing Y as a function of G, T, and M/P.

Watch
1
answer
1
watching
1,202
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Retselisitsoe Pokothoane
Retselisitsoe PokothoaneLv10
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

1. Assume that the equilibrium in the money market may be described as M/P = 0.5Y - 100r, and M/P equals 800.

a. Write the LM curve two ways, expressing Y as a function of r and r as a function of Y. (Hint: Write the LM curve only relating Y and r; substitute out M/P.)

b. What is the slope of the LM curve?

c. If r is 1 percent, what is Y along the LM curve? If r is 3 percent, what is Y along the LM curve? If r is 5 percent, what is Y along the LM curve?

d. If M/P increases, does the LM curve shift upward and to the left or downward and to the right?

e. If P increases and M is constant, does the LM curve shift upward and to the left or downward and to the right?

 

Assume the following model of the economy, with the price level fixed at 1.0:

C = 0.8(Y-T), Ms = 1200, Md/P = 0.4Y-40r,

I = 800-20r, T = 1000, G = 1000,

where Ms and Md are the nominal supply of money and nominal demand for money.

(a) Write a formula for the IS curve, showing Y as a function of r alone.

(b) Write a formula for the LM curve, showing Y as a function of r alone.

(c) What are the short-run equilibrium values Y, r, Yd, C, I, S, Sp, and Sg, and national saving?

(d) Assume G increases by 200. By how much will Y increase in short-run equilibrium? What is the government purchases multiplier?

(e) Assume that G is back at its original level, but Ms increases by 200. By how much will Y increase in short-run equilibrium? What is the multiplier for the money supply?

Assume that the economy is characterized by the following equations:

Derive the IS, LM equations. Calculate the equilibrium Y and r.

If = 14000, is the economy in recession or expansion? If the objective of policymakers is to keep the economy at its natural output level and have a balanced budget, which combination of policies would be needed? Illustrate and explain.

C=1000+0.6(Y-T)

T=1500

G=2000

I=1100-100r

L(r,Y)=1000+0.5Y-500r

M(s)=12000

P=2

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in