a. Derive the IS curve and compute equilibrium output and interest rate b. Derive the LM curve and compute equilibrium money supply c. Suppose the Central Bank revalues exchange rate from 1 to 0.85. Recalculate the equilibrium output, interest rate, and money supply d. Suppose the Central Bank devaluates the exchange rate from 1 to 1.3. Recalculate the equilibrium output, interest rate, and money supply.
a. Derive the IS curve and compute equilibrium output and interest rate b. Derive the LM curve and compute equilibrium money supply c. Suppose the Central Bank revalues exchange rate from 1 to 0.85. Recalculate the equilibrium output, interest rate, and money supply d. Suppose the Central Bank devaluates the exchange rate from 1 to 1.3. Recalculate the equilibrium output, interest rate, and money supply.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter6: Managing In The Global Economy
Section: Chapter Questions
Problem 4E
Related questions
Question
Consider an economy with the following
C = 200 + 0.4(Y − T)
I = 300 − 5000r
T = 0, G = 0
L(rw, Y ) = 250 + 0.06Y − 300r
P = 1
e = 1
rw = 0.09
e is the fixed exchange rate
a. Derive the IS curve and compute equilibrium output and interest rate
b. Derive the LM curve and compute equilibrium money supply
c. Suppose the Central Bank revalues exchange rate from 1 to 0.85. Recalculate the
equilibrium output, interest rate, and money supply
d. Suppose the Central Bank devaluates the exchange rate from 1 to 1.3. Recalculate the
equilibrium output, interest rate, and money supply.
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