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II. Consider the following IS-LM model: C = 200 + 0.25Y, I = 150 + 0.25Y – 1,000i G = 250 T = 200 (M/P)ª = 2Y – 8,000i M/P = 1,600 a. Derive the IS relation. (Hint: You want an equation with Y on the left side and everything else on the right.) b. Derive the LM relation. (Hint: It will be convenient for later use to rewrite this equation with i on the left side and everything else on the right.) c. Solve for equilibrium real output. (Hint: Substitute the expression for the interest rate given by the LM equation into the IS equation and solve for output.) d. Solve for the equilibrium interest rate. (Hint: Substitute the value you obtained for Y in part (c) into either the IS or LM equation and solve for i.) e. Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G. f. Now suppose that the money supply increases to M/P = 1,840. Solve for Y, i, C, and I, and describe in words the effects of an expansionary monetary policy. g. Set M/P equal to its initial value of 1,600. Now suppose that government spending increases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, i, and

II. Consider the following IS-LM model: C = 200 + 0.25Y, I = 150 + 0.25Y – 1,000i G = 250 T = 200 (M/P)ª = 2Y – 8,000i M/P = 1,600 a. Derive the IS relation. (Hint: You want an equation with Y on the left side and everything else on the right.) b. Derive the LM relation. (Hint: It will be convenient for later use to rewrite this equation with i on the left side and everything else on the right.) c. Solve for equilibrium real output. (Hint: Substitute the expression for the interest rate given by the LM equation into the IS equation and solve for output.) d. Solve for the equilibrium interest rate. (Hint: Substitute the value you obtained for Y in part (c) into either the IS or LM equation and solve for i.) e. Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G. f. Now suppose that the money supply increases to M/P = 1,840. Solve for Y, i, C, and I, and describe in words the effects of an expansionary monetary policy. g. Set M/P equal to its initial value of 1,600. Now suppose that government spending increases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, i, and

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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part d, e, f

II. Consider the following IS-LM model: C = 200 + 0.25Y, I = 150 + 0.25Y – 1,000i G = 250 T = 200 (M/P)ª = 2Y – 8,000i M/P = 1,600 a. Derive the IS relation. (Hint: You want an equation with Y on the left side and everything else on the right.) b. Derive the LM relation. (Hint: It will be convenient for later use to rewrite this equation with i on the left side and everything else on the right.) c. Solve for equilibrium real output. (Hint: Substitute the expression for the interest rate given by the LM equation into the IS equation and solve for output.) d. Solve for the equilibrium interest rate. (Hint: Substitute the value you obtained for Y in part (c) into either the IS or LM equation and solve for i.) e. Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G. f. Now suppose that the money supply increases to M/P = 1,840. Solve for Y, i, C, and I, and describe in words the effects of an expansionary monetary policy. g. Set M/P equal to its initial value of 1,600. Now suppose that government spending increases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, i, and С.
Transcribed Image Text:II. Consider the following IS-LM model: C = 200 + 0.25Y, I = 150 + 0.25Y – 1,000i G = 250 T = 200 (M/P)ª = 2Y – 8,000i M/P = 1,600 a. Derive the IS relation. (Hint: You want an equation with Y on the left side and everything else on the right.) b. Derive the LM relation. (Hint: It will be convenient for later use to rewrite this equation with i on the left side and everything else on the right.) c. Solve for equilibrium real output. (Hint: Substitute the expression for the interest rate given by the LM equation into the IS equation and solve for output.) d. Solve for the equilibrium interest rate. (Hint: Substitute the value you obtained for Y in part (c) into either the IS or LM equation and solve for i.) e. Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G. f. Now suppose that the money supply increases to M/P = 1,840. Solve for Y, i, C, and I, and describe in words the effects of an expansionary monetary policy. g. Set M/P equal to its initial value of 1,600. Now suppose that government spending increases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, i, and С.
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