Answered: State the assumptions of the 4th…

State the assumptions of the 4th generation Keynesian model and explain how its endogenous variables are determined graphically Graphically demonstrate how to construct an IS(LM) curve.

Macroeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506756

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter11: Fiscal Policy: The Keynesian View And Historical Development Of Macroeconomics

Section: Chapter Questions

Problem 1CQ

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State the assumptions of the 4th generation Keynesian model and explain how its endogenous variables are determined graphically

Graphically demonstrate how to construct an IS(LM) curve.

State the product market equilibrium condition, define an IS curve and explain why it is downward sloping.

Defintion Defintion Curve that represents the graphical relationship between the total supply of goods and services and the price level in the economy. When the price level increases, producers tend to supply more of a product in the market to earn a higher revenue or vice versa.

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Step 2: Assumptions of the 4th generation Keynesian model

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Step 3: IS-LM Model

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Step 4: Product market equilibrium

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