8) Consider the economy of Hicksonia. a. The consumption function is given by C=200 +0.75(Y-T) The investment function is I = 200-25i Government purchases and taxes are both 100. For this economy, graph the IS curve for i ranging from 0 to 8. Is the Government running a surplus or a deficit (or neither)?
8) Consider the economy of Hicksonia. a. The consumption function is given by C=200 +0.75(Y-T) The investment function is I = 200-25i Government purchases and taxes are both 100. For this economy, graph the IS curve for i ranging from 0 to 8. Is the Government running a surplus or a deficit (or neither)?
Principles of Economics (MindTap Course List)
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Chapter36: Six Debates Over Macroeconomic Policy
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![8) Consider the economy of Hicksonia.
a. The consumption function is given by
C=200 +0.75(Y-T)
The investment function is
I = 200-25i
Government purchases and taxes are both 100. For this economy, graph the IS curve
for i ranging from 0 to 8. Is the Government running a surplus or a deficit (or
neither)?
b. The money dema File Preview n Hicksonia is
--)d=Y-100i
The money supply M is 1,000 and the price level P is 2. For this economy, graph the
LM curve for i ranging from 0 to 8.
c. Find the equilibrium interest rate i and the equilibrium level of income Y.
d. Suppose that the government purchases are raised from 100 to 150. How much does
the IS curve shift? What are the new equilibrium interest rate and level of income?
e. Suppose instead that the money supply is raised from 1,000 to 1,200. How much does
the LM curve shift? What are the new equilibrium interest rate and level of income?
f. With the initial values for monetary and fiscal policy, suppose that the price level rises
from 2 to 4. What happens? What are the new equilibrium interest rate and level of
income?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fde896710-2b54-45be-88d1-633cf40974b6%2Fbc2249c3-ecb2-40ce-b58a-518c6b04ae63%2F5bh6gis_processed.png&w=3840&q=75)
Transcribed Image Text:8) Consider the economy of Hicksonia.
a. The consumption function is given by
C=200 +0.75(Y-T)
The investment function is
I = 200-25i
Government purchases and taxes are both 100. For this economy, graph the IS curve
for i ranging from 0 to 8. Is the Government running a surplus or a deficit (or
neither)?
b. The money dema File Preview n Hicksonia is
--)d=Y-100i
The money supply M is 1,000 and the price level P is 2. For this economy, graph the
LM curve for i ranging from 0 to 8.
c. Find the equilibrium interest rate i and the equilibrium level of income Y.
d. Suppose that the government purchases are raised from 100 to 150. How much does
the IS curve shift? What are the new equilibrium interest rate and level of income?
e. Suppose instead that the money supply is raised from 1,000 to 1,200. How much does
the LM curve shift? What are the new equilibrium interest rate and level of income?
f. With the initial values for monetary and fiscal policy, suppose that the price level rises
from 2 to 4. What happens? What are the new equilibrium interest rate and level of
income?
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