i need Part a and b Solution just Question 2Assume the following model of a closed economy, with the price level P fixed at 1.0C = 0.6 (Y – T)I = 500 – 50rMs = 450T = 200G= 250Mp= 2Y – 200rWhere C is consumption, Y is output, T is taxes, I is investment, ris the interest rate, Gis government spending, Mş is the money supply, and Mp is money demand.a) Derive formulas for the IS and LM schedules, showing Y as a function of r alone.(20%)b) Calculate the short-run equilibrium values of Y, C, I, and r. (20%)c) Suppose that the central bank doubles the money supply to 900. Draw a diagram,and explain in words what will happen. Find the new values of Y, r, and I. (30%)d) Suppose now the money demand relationship was instead given byMp2Y – 50rPWhat value of the money supply would result in the same outcome for Y and rthat was obtained in part b)? Suppose the central bank initially sets the moneysupply at this value but then doubles it. What is the increase in Y that results fromthis doubling? Why do you think it is greater than the increase in Y that resultedfrom doubling the money supply in part c)? (30%)

2) Given P = 1.0 C = 0.6(Y - T) I = 500 - 50r Ms = 450 T = 200 G = 250 Md/P = 2Y - 200r. a) IS…

Question 2 Assume the following model of a closed economy, with the price level P fixed at 1.0 C = 0.6 (Y – T) I = 500 – 50r Ms = 450 T = 200 G= 250 Mp = 2Y – 200r Where C is consumption, Y is output, T is taxes, I is investment, ris the interest rate, G is government spending, Mş is the money supply, and Mp is money demand. a) Derive formulas for the IS and LM schedules, showing Y as a function of r alone. (20%) b) Calculate the short-run equilibrium values of Y, C, I, and r. (20%)

Question 2 Assume the following model of a closed economy, with the price level P fixed at 1.0 C = 0.6 (Y – T) I = 500 – 50r Ms = 450 T = 200 G= 250 Mp = 2Y – 200r Where C is consumption, Y is output, T is taxes, I is investment, ris the interest rate, G is government spending, Mş is the money supply, and Mp is money demand. a) Derive formulas for the IS and LM schedules, showing Y as a function of r alone. (20%) b) Calculate the short-run equilibrium values of Y, C, I, and r. (20%)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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