1- Consider the following IS-LM model:I= 150 + 25Y - 1000i,(M/P 2Y 8000i,G=250,T= 200C=200 + 25YD.NX 0,M/P = 1600.a) Derive the IS relationb) Derive the LM relation.c) Solve for equilibrium real output (Y*).d) Solve for the equilibrium interest rate (i*)e) Solve for the equilibrium values of C and I, and verify the value you obtained for Y byadding C, I, and G.) Now suppose that the money supply increases to M/P =1,840. Solve for Y, i c, and T, anddescribe in words the effects of an expansionary monetary policy.g) Set M/P equal to its initial value of 1,600. Now suppose that government spendingincreases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, 1. C.h) The expansionary fiscal policy in part (g) have resulted in large budget deficit (T= G =200 – 400 = -200). Suggest a policy mix to decrease fiscal deficit to achieve a balancedbudget (T = G = 0).b(Ctrl) -立

Note: Since you have posted a question with multiple subparts, we will solve the first three…

1- Consider the following IS-LM model: I= 150 + 25Y - 1000i, (M/P)=2Y - 8000i, G=250, T=200. C=200 + 25YD NX = 0 M/P = 1600. %3D a) Derive the IS relation b) Derive the LM relation c) Solve for equilibrium real output (Y*).

1- Consider the following IS-LM model: I= 150 + 25Y - 1000i, (M/P)=2Y - 8000i, G=250, T=200. C=200 + 25YD NX = 0 M/P = 1600. %3D a) Derive the IS relation b) Derive the LM relation c) Solve for equilibrium real output (Y*).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

1
Hi, Could you help me solve this problem? The problem is attached as an image, as it contains characters I cannot type here.
Question 3 This question refers to an economy in two different situations. Situation 0 (Initial situation) is described in Table 1 and Situation 1 (New situation) is described in Table 2. In both situations, the potential output is Y=2,000. Concept Consumption function |Тахes Investment Government purchases |Quantitative Information |C=550+0.5×(Y-T) T=100 I=50 |G0=100 Table 1 (Situation 0: Initial situation) Concept Consumption function |Тахes Investment Government purchases |Quantitative Information |C=550+0.5×(Y-T) T=100 |I=50 |GI=200 Table 2 (Situation 1: New situation) a. Find the equilibrium income Y* in the initial situation b. Find the equilibrium income Y** in the new situation c. What is the numerical value of the multiplier of government purchases? d. Draw a 45° diagram showing the two equilibrium situations and identify in your diagram both the change in Y (=AY) and the change in GG (=AG). e. After the fiscal stimulus, is this economy in equilibrium with unemployment?…
Consider the basic Macroeconomic model involving: Private sector consumption: C = co+c1(Y-T); Y = GDP, T = Taxes Tax function: T = to+t1Y Business sector investment: I = io+i2r, r=interest rate Government spending: G = Go Exports: X = xo+x1x; x = Exchange rate of the dollar Imports: M = mo+m1Y+m2x; x = Exchange rate (a) Identify and explain the parameters: co, t1, i2, and m2. (b) Solve this model for the equilibrium GDP (Y*).
IS-LM model is defined via seven equations given below: C =15+0.8(Y -T) T = -25+ 0.25Y I = 65 – R G=94 X = 50– 10-0.1Y L = 5Y – 50R M =1500 C: Consumption, Y: Income, T: Tax, I: Investment, R: Interest Rate, G: Government Expenditure, X: Net Exports, L: Money Demand and M: Money Supply. Solve this system for Y and R in the matrix format by reducing it to IS and LM equations. Calculate government and trade deficits. Note that IS-LM structure is based on Y and R.
Consider the following IS-LM model: C=co +0₁ (Y-T) 1=bo+bqY - bol Z=C+I+G i=i (note: there is a bar over the righthandi) Assume c, +b, <1. (-CT+bo-b2+8) 1-0₁-b₁ Equilibrium output for this model is calculated as Y= expression using the tools in the palette. Hover over tools to see keyboard shortcuts Eg., a subscript can be created with the character) (bo-boc1 cob₁b₁G-c₁b₁T-b₂b₂0₁¹) (d₁c+d₂bo+d₂ G-d₁c₁T-d₂b₁d₂c₁d₂ / + b₁d₂1) 1-0₁-b₁ (Enter the algebraic expression for equilibrium output.) (Properly format your Equilibrium investment for this model is calculated as (Property format your expression using the tools in the palette) Let's go behind the scene in the money market. Use the equilibrium in the money market M/Pd₂Y-dal to solve for the equilibrium level of the real money supply when 1=1₁ M/P the tools in the palette) How does the real money supply vary with government spending? 1-0₁-b₁ (Enter the algebraic expression for equilibrium output) (Enter the algebraic expression for…
Please explain to me how to solve this problem. Try to be as specific as possible. Thanks. It is a Macroeconomics II problem.
Assume that an economy's production function is Y=1,000L1/2,so that when the marginal product of capital is equated to the real wage the labor demand curve is L = 250,000(P/W)2. The labor supply curve is L = 31,250(W/P). The real wage that solves these equations is W/P = 2. Assume that the expected price level is 10, so that a nominal wage contract setting the wage at 20 is agreed to, making the expected real wage 2. If the price level turns out to be 10, 62,500 workers will be hired and output will be 250,000. If the actual price level turns out to be 20, what will the actual real wage be?b. According to the labor demand curve, how much labor will be demanded if the actual real wage is at the level given in part a?c. According to the production function, if the amount of labor given in part b is actually hired, how much will production be?
Our closed economy has a production function Y = A•F(K,LxE), where Y, K, L, E & A all have their usual meanings as per our lectures & course textbook. Also, this production function exhibits all the usual mathematical/economic properties we usually assume: positive marginal products, diminishing marginal products, complementarity between K & (LxE), and constant returns to scale. The aggregate consumption function depends negatively on the real interest rate, the government budget is balanced initially & the economy is in both a long-run equilibrium and steady state initially. The population growth rate is 2% per year, capital depreciates at a rate of 3% per year, the saving rate is 25% and technology is constant. Suppose the level of labour effectiveness (E) suddenly permanently rises by 10%. a) Use the long-run classical model to determine the qualitative impact of this shock on the long-run equilibrium levels of real output, consumption, investment, real interest…
Assume a model economy with the following parameters: C=300+0.25 Yd I=250+0.5Y-2500i G=350 T=300 (M/P)d= 4Y-16,000i (M/P)s= 880 Derive the IS and LM relations and solve for equilibrium real output and equilibrium interest rate.
Our closed economy has a production function Y = A•F(K,LxE), where Y, K, L, E & A all have their usual meanings as per our lectures & course textbook. Also, this production function exhibits all the usual mathematical/economic properties we usually assume: positive marginal products, diminishing marginal products, complementarity between K & (LxE), and constant returns to scale. The aggregate consumption function depends negatively on the real interest rate, the government budget is balanced initially & the economy is in both a long-run equilibrium and steady state initially. The population growth rate is 2% per year, capital depreciates at a rate of 3% per year, the saving rate is 25% and technology is constant. Suppose the level of labour effectiveness (E) suddenly permanently rises by 10%. a) Use the long-run classical model to determine the qualitative impact of this shock on the long-run equilibrium levels of real output, consumption, investment, real interest…
For the next four questions, assume the economy can be described by the following set of equations: C/Ỹ = 0.4 + 0.8Y (Please note the variable with the coefficient 0.8 is Y tilde. The variable by which C is divided is Y bar, potential output. It is difficult to read the notation.) I/Y = 0.3 – 2(R - F) G/Y = 0.3 C+I+G Y Also assume that F 0.02 and Y 10 %3D This is a complete IS model with a multiplier. You will be given the value of R set by monetary policy in each question. For all questions, enter the answer rounded to 1 decimal place.