Consider the national income model below 0< ac ΟΥ Y C(Y)-I(i)- Go=0 kY + L(i) - Mso 1; al di < 0; ƏL di = 0 < 0; k = positive constant

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Chapter1: Making Economics Decisions
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Consider the national income model below
0 <
ac
Əy
Y C(Y)-I(i) Go=0
kY + L(i) — Mso = 0
< 1;
al
di
< 0;
ƏL
di
< 0; k = positive constant
Transcribed Image Text:Consider the national income model below 0 < ac Əy Y C(Y)-I(i) Go=0 kY + L(i) — Mso = 0 < 1; al di < 0; ƏL di < 0; k = positive constant
Suppose that while demand for money still depends on Y as specified, it is now no longer affected
by the interest rate.
• How should the system of equations above be revised?
• Write the new Jacobian and call it J'. Is |J'| numerically (in absolute value) larger or smaller than
|J|?
• Find the new comparative static derivatives
Transcribed Image Text:Suppose that while demand for money still depends on Y as specified, it is now no longer affected by the interest rate. • How should the system of equations above be revised? • Write the new Jacobian and call it J'. Is |J'| numerically (in absolute value) larger or smaller than |J|? • Find the new comparative static derivatives
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