Consider an IS/LM model of an economy with the following equations: C = 300 + 0.6Ya I = 100 – 5i G = 200 TR = 200 T = 0.1Y L = 0.4Y - 30i M[P = 500 %3D (a) Using the above data, derive the equation for the IS schedule. (b) In this example, what is the equation for the LM schedule? Calculate the equilibrium level of income and interest rates. Sketch the IS/LM equilibrium position. (c) What are the values of the monetary policy multipliers with respect to income and interest rates? If the money supply is increased by 30, what are the new market- clearing income and interest rate levels? (d) [All calculations to two decimal points. You must report your calculations.]

Consider an IS/LM model of an economy with the following equations: C = 300 + 0.6Ya I = 100 – 5i G = 200 TR = 200 T = 0.1Y L = 0.4Y - 30i M[P = 500 %3D (a) Using the above data, derive the equation for the IS schedule. (b) In this example, what is the equation for the LM schedule? Calculate the equilibrium level of income and interest rates. Sketch the IS/LM equilibrium position. (c) What are the values of the monetary policy multipliers with respect to income and interest rates? If the money supply is increased by 30, what are the new market- clearing income and interest rate levels? (d) [All calculations to two decimal points. You must report your calculations.]

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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