1. Suppose IS curve is Y = 4500-100i and Y = 2000+250i is the LM curve. a) Compute i and Y. Compute the same using Cramer's rule b) If government spending rose by 100m with an immediate impact elasticity of 2.5 for the goods market, determine the new IS curve. Explain goods market dynamics. c) Suppose government borrowed from the domestic financial market. Determine the impact of expansionary fiscal policy on interest rate. Hint: use di/dA = 0.02 %3D

1. Suppose IS curve is Y = 4500-100i and Y = 2000+250i is the LM curve. a) Compute i and Y. Compute the same using Cramer's rule b) If government spending rose by 100m with an immediate impact elasticity of 2.5 for the goods market, determine the new IS curve. Explain goods market dynamics. c) Suppose government borrowed from the domestic financial market. Determine the impact of expansionary fiscal policy on interest rate. Hint: use di/dA = 0.02 %3D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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