Business, 24.06.2020 06:01 charmrenee

Consider the following IS-LM model: C = 200 + 0.25YD
= 150 + 0.25Y - 1000i
G = 250
T = 200
(M/P)d = 2Y - 8000i
M/P = 1600
a) Derive the IS relation. (Hint: you want an equation with Y on the left side and everything else on the right)
b) Derive the LM relation. (Hint: it will be convenient for later use to rewrite this equation with i on the left side and everything else on the right)
c) Solve the equilibrium for real output. (Hint: Substitute the expression for the interest rate given by the LM equation into the IS equation and solve for output)
d) Solve the equilibrium interest rate. (Hint: Substitute the value you've obtained for your Y in part (c) into either the IS or LM equations and solve for i . If your algebra is correct you should get the same answers in both eqautions.)
e) Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G
f) Now suppose that the money supply increases to M/P = 1840. Solve for Y, i, c and T, and describe in words the effects of an expansionary monetary policy.
g) Set M/P equal to its initial value of 1600. Now suppose that government spending increases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, i, and C.

Answers: 2

Show answers

Other questions on the subject: Business

Business, 22.06.2019 08:00, savannahworkman11

How do communism and socialism differ in terms of the role that government plays in the economy ?

Answers: 1

continue

Business, 22.06.2019 08:40, alvalynnw

Mcdonald's fast-food restaurants have a well-designed training program for all new employees. each new employee is supposed to learn how to perform standardized tasks required to maintain mcdonald's service quality. due to labor shortages in some areas, new employees begin work as soon as they are hired and do not receive any off-the-job training. this nonconformity to standards creates

Answers: 2

continue

Business, 22.06.2019 10:30, khenalilovespandas

Marketing1. suppose the average price for a new disposable cell phone is $20, and the total market potential for that product is $4 million. topco, inc. has a planned market share of 10 percent. how many phones does topco have the potential to sell in this market? 20,0002. use the data from question 3 to calculate topco, inc.'s planned market share in dollars. $400,0003. atlantic car rental charges $29.95 per day to rent a mid-size automobile. pacific car rental, atlantic's main competitor, just reduced prices on all its car rentals. in response, atlantic reduced its prices by 5 percent. now how much does it cost to rent a mid-size automobile from atlantic? $28.45

Answers: 1

continue

Business, 22.06.2019 12:30, ash011519

On june 1, 2017, blossom company was started with an initial investment in the company of $22,360 cash. here are the assets, liabilities, and common stock of the company at june 30, 2017, and the revenues and expenses for the month of june, its first month of operations: cash $4,960 notes payable $12,720 accounts receivable 4,340 accounts payable 840 service revenue 7,860 supplies expense 1,100 supplies 2,300 maintenance and repairs expense 700 advertising expense 400 utilities expense 200 equipment 26,360 salaries and wages expense 1,760 common stock 22,360 in june, the company issued no additional stock but paid dividends of $1,660. prepare an income statement for the month of june.

Answers: 3

continue

You know the right answer?

Consider the following IS-LM model: C = 200 + 0.25YD
= 150 + 0.25Y - 1000i
G = 250