6) Consider the following IS-LM model:C = 200+ 0.25YDI = 150+ 0.25Y -1000iG = 250T = 200M= 2Y - 8,000iM= 1,600Pa. Derive the IS relation.b. Derive the LM relation.c. Solve for the equilibrium real output.d. Solve for the equilibrium interest rate.e. Solve for the equilibrium values of C and I and verify the value you obtained for Y byadding up C, I, and G.M1,840f. Now suppose that the money supply increases to PSolve for Y, i, C, and I,and describe in words the effects of an expansionary monetary policy.MPg. Setequal 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, i, andC.

The IS-LM model basically refers to a Keynesian macroeconomic model that illustrates how the market…

6) Consider the following IS-LM model: C = 200 +0.25YD I = 150+ 0.25Y -1000i G = 250 T = 200 M - 8,000i P M = 1,600 P a. Derive the IS relation. b. Derive the LM relation. c. Solve for the equilibrium real output. d. Solve for the equilibrium interest rate. e. Solve for the equilibrium values of C and I and verify the value you obtained for Y by adding up C, I, and G. = = 2Y -

6) Consider the following IS-LM model: C = 200 +0.25YD I = 150+ 0.25Y -1000i G = 250 T = 200 M - 8,000i P M = 1,600 P a. Derive the IS relation. b. Derive the LM relation. c. Solve for the equilibrium real output. d. Solve for the equilibrium interest rate. e. Solve for the equilibrium values of C and I and verify the value you obtained for Y by adding up C, I, and G. = = 2Y -

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

This is on the basics of the IS-LM model. The model is given by the following system of equations Y = C(Y;Y;r; A) + I(Y;r; K) M/P = Y/V(i) where ri- and A denotes the wealth of the households. The rest of the notations are standard. What happens to the IS curve when the stock of capital increases? Select one or more: a. A movement along the IS curve b. IS shifts to the right c. Nothing d. IS shifts to the left
1. [Matrix Inversion in IS-LM Model] Given the IS equation 0.4Y +150r – 847.75 = 0, and the LM equation 0.1Y – 250r – 158.75 = 0, find the equilibrium level of national income Y and the interest rate r by using the technique of matrix inversion.
I need help with e, f and g
Only typed answer
Consider an economy that begins in a situation in which output equals potential output. Consider the modified representation of the IS-LM diagram in which the y-axis is the nominal interest rate versus the real interest rate, where we take into account the presence of the zero lower bound (Graph A). Suppose that a collapse in house prices impacts the economy. 1. Use either the 4-point curved line drawing tool or the line drawing tool to show the effect on either the IS or the LM curve. Hint: Only one curve will shift. 2. Use the point drawing tool to indicate the new equilibrium output and nominal interest rate. Carefully follow the instructions above and only draw the required objects. Graph A 0- урот e₁ LM IS Select Line 4-point Curve Point
b
Analyze, using the IS-LM model, the macroeconomic effects of an increase in savings in the short term and its implications for long-term growth. Specifically, suppose that households (consumers) lose confidence and start saving more for any level of disposable income. Please answer the following question (with graphs where possible): How does the loss of consumer confidence affect production, investment andprivate savings?
State whether True/false.
Assume the following IS-LM model: Expenditure sector:C = 100 + (4/5)YD G = 120 I = 300 - 20i YD = Y - TA NX = -20 TA = (1/4)Y Money sector: M = 700 P = 2 Md = (1/3)Y + 200 - 10i a) Derive the IS and LM equations for the above model. b) Draw the IS and LM curves. What are the equilibrium values of output (Y) and interest rate (i)? Show these values on the graph you drew. Derive the equilibrium values of consumption (C) and money demand (Md). c) How much investment (I) will be crowded out if the government increases its purchases by DG = 160 and nominal money supply (M) remains unchanged? Show how this increase in government purchases would affect the graph in part (b) by drawing a new graph.
Suppose the economy of Ghana in 2020 was characterized by C = ¢400m + 0.75(Y-T); I = ¢400m - 20r; G = ¢200m; T = ¢200m; Ms = ¢250m/P; Md = 0.25Y - 10r a. Derive the IS and LM curve equations. Give a brief explanation as to why they are positively or negatively sloped. b. Calculate equilibrium output and interest rates (in this case assume P=1). Econ313 2020/2021 PROBLEM SET 2 Page 1 of 2 c. Suppose the government of Ghana in the second half of 2020 spent an additional ¢50m to mitigate the impact of the COVID pandemic on households and businesses and government tax revenue declined by 10% as a result of the lockdown in Ghana what will be the new equilibrium output? d. Will the policy in (c) above have an impact on interest rate? Briefly explain. e. What is the amount of the fiscal deficit incurred as a result of the government fiscal policies as pursued in (c) above?
3. Graphically illustrate the Keynesian Model, show the equilibrium level of GDP (label it Ye) and the full employment level of GDP (label it Yf).
Hh