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Consider the following IS-LM Model

C = 202 + 0.48Yd

I = 148 + 0.14Y - 834i

G = 275

T = 218

(M/P)^d = 2.4Y - 7434i

M/P = 1548

IS EQUATION Y=1361.47-2194.74i

LM EQUATION i=-0.20823+0.00032y

a. solve the equilibrium real output,Y. 1068

Y=? round to the nearest integer

B. solve for equilibrium interest rate?

c. determine the equilibrium value of C?

d. determine the equilibrium value of I?

E. using the answers above, determine the value of C+I+G? round to the nearest integer.

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Darryn D'Souza
Darryn D'SouzaLv10
28 Sep 2019

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Related questions

Consider the following IS-LM Model

C = 189 + 0.52Yd

I = 145 + 0.12Y - 1025i

G = 329

T = 263

(M/P)^d = 1.6Y - 7737i

M/P = 1579

The IS equation is determined to be Y=1461.78-2847.22i

The LM equation is determined as i=-0.20408+0.00021Y

Initial equilibrium values of Y,i,c, and I are calculated bellow.

Y=1278

i=6.43%

C=717

I=232

Suppose that money supply increases to (m/p)=1737

Calculate the equation for the new LM relation.

i=-0.22451+0.00021Y

1. giving the above IS-LM equation, what is the equilibrium output(Y) interest(i)?

what is the equilibrium value of C?

what is the equilibrium value of I ?

DETERMINE THE VALUE OF C+I+G? round answer to the nearest integer.


2. Consider the following IS-LM mode:

C=200 + .25YD

I=150+.25Y-1,000i

G=250

T=200

(M/P)^d =2Y-8000i

M/P=1,600

2a. Derive the IS relation

2b. Derive the LM relation.

2c. Solve for equilibrium real output

2d. Solve for the equilibrium interest rate.

2e. Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G.

2f. Now suppose that the money supply increases to M/P=1840. Solve for Y,i,C, and I.

2g. 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.

1. The Response of investment to fiscal policy

1a. Using the IS-LM diagram, show the effects on output and the interest rate of a decrease in government spending. Can you tell whay happens to investment? Why?

Now consider the following IS-LM model:

C=c0+c1(Y-T)

I=b0+b1Y-b2i

M/P=d1Y-d2i

1b. Solve for equilibrium output. Assume c1+b1<1

1c. Solve for the equilibrium interest rate.

1d. Solve for investment.

1e. Under waht conditions on the parameters of the model will investment increase when G decreases?

1f. Explain the condition you derived in part e.

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