2. Consider a Keynesian IS-LM model for national income:Y=C(Y-T) + I (r) + GL (r,Y)= M*where we consider Y and r as the endogenous variables and G, M, and T as theexogenous variables.Given:IS:LM:Implicit function theorem• Implicit function theorem. - Consider an equationF(x1,..., Xm. y) = 0. If an implicit function y = f (x1,...,xm) exists,then the desired derivatives can be found byQuestion:(b)дуƏx;ƏF/Əx;ƏF/ƏyFind the effect of a lump-sum tax, T, change on r, i.e., Or/OT, using theimplicit function theorem.

Answered: 2. Consider a Keynesian IS-LM model for…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. Consider a Keynesian IS-LM model for national income:
Y=C(Y-T) + I (r) + G
L (r,Y)= M*
where we consider Y and r as the endogenous variables and G, M, and T as the
exogenous variables.
Given:
IS:
LM:
Implicit function theorem
• Implicit function theorem. - Consider an equation
F(x1,..., Xm. y) = 0. If an implicit function y = f (x1,...,xm) exists,
then the desired derivatives can be found by
Question:
(b)
ду
Əx;
ƏF/Əx;
ƏF/Əy
Find the effect of a lump-sum tax, T, change on r, i.e., Or/OT, using the
implicit function theorem.

Expert Solution

Step 1

The IS-LM model, which means "investment-savings" (IS) and "liquidity preference-money supply" (LM) is a Keynesian macroeconomic model that shows how the market for economic merchandise (IS) interacts with the loanable market (LM) or money market.

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