Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Suppose the economy of Ghana in 2020 was characterized by
C = ¢400m + 0.75(Y-T); I = ¢400m - 20r; G = ¢200m; T = ¢200m;
Ms = ¢250m/P; Md = 0.25Y - 10r
a. Derive the IS and LM curve equations. Give a brief explanation as to why they are
positively or negatively sloped.
b. Calculate equilibrium output and interest rates (in this case assume P=1).
Econ313 2020/2021 PROBLEM SET 2 Page 1 of 2
c. Suppose the government of Ghana in the second half of 2020 spent an additional ¢50m to mitigate the impact of the COVID pandemic on households and businesses and government tax revenue declined by 10% as a result of the lockdown in Ghana what will be the new equilibrium output?
d. Will the policy in (c) above have an impact on interest rate? Briefly explain.
e. What is the amount of the fiscal deficit incurred as a result of the government fiscal
policies as pursued in (c) above?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step 1: Define IS-LM curve
VIEWStep 2: Derive the IS and LM curve equations and also discuss they are positively or negatively sloped.
VIEWStep 3: Calculate equilibrium output and interest rates
VIEWStep 4: Explain the new equilibrium output
VIEWStep 5: Explain the policy in (c) above have an impact on interest rate.
VIEWStep 6: Explain the amount of the fiscal deficit incurred as a result of the government fiscal policies
VIEWSolution
VIEWStep by step
Solved in 7 steps with 37 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education