Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Business Economics Expert

Derivation of the IS-LM equation and finding out the equilibrium values of all the variables like C, I, G, S, etc..

Assume the following model of the economy, with the price level fixed at 1.0:

C = 0.8(Y - T),
T = 1,000,
I = 800 - 20r,
G = 1,000,
Y = C + I + G Ms/P = Md/P = 0.4Y - 40r
Ms = 1,200

a. prepare a numerical formula for the IS curve, showing Y as a function of r alone. (Hint: Substitute out C, I, G, and T.)

b. prepare a numerical formula for the LM curve, showing Y as a function of r alone. (Hint: Substitute out M/P.)

c. What are the short-run equilibrium values of Y, r, Y - T, C, I, private saving, public saving, and national saving? Check by ensuring that C + I + G = Y and national saving equals I.

d. Assume that G increases by 200. By how much will Y increase in short-run equilibrium? What is the government-purchases multiplier (the change in Y divided by the change in G)?

e. Suppose that G is back at its original level of 1,000, but Ms (the money supply) increases by 200. describe by how much will Y increase in short-run equilibrium? What is the multiplier for money supply (the change in Y divided by the change in Ms)?

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M919857

Have any Question? 


Related Questions in Business Economics

Write a program for the arduino uno microcontroller to turn

Write a program for the Arduino UNO microcontroller to turn an LED at pin 10 on for 1.25 sec, and off for 2.75 sec., continuously and repeatedly. Write a multi-line comment at the top of the program. Include on the first ...

Discuss the concept of a ldquotwilight of white ethnicity

Discuss the concept of a “twilight of white ethnicity". How does this concept match with your experiences of race and ethnicity in the United States? Do you believe “whiteness” will disappear as a racial and/or ethnic ca ...

Economics for business assignment-topics for group

Economics for Business Assignment- Topics for Group Assignment - GDP - Compare Australia with any other economy and discuss their GDP last 2 to 5 years and factors affecting their GDP. Unemployment - Discuss the unemploy ...

1 a assuming that the velocity of money is constant if a

1. (a) Assuming that the velocity of money is constant, if a country has an average annual growth rate of real GDP equal to 3%, then what is the average annual rate of money growth that would required to produce an avera ...

Florida citrus mutual an agricultural cooperative

Florida Citrus Mutual, an agricultural cooperative association for citrus growers in Florida, needs to predict what will happen to the price and output of Florida oranges under the conditions below. What are your predict ...

Why is it that when you have a trade deficit saving is less

Why is it that when you have a trade deficit saving is less than investment. S-I=NX. A trade deficit just means you bought more products from foreign sellers than you sold to them. So is a trade deficit even a bad thing? ...

Suppose that coffee growers sell 200 million pounds of

Suppose that coffee growers sell 200 million pounds of coffee beans at $2 per pound in 2007, and sell 240 million pounds for $3 per pound in 2008. Based on this information we can conclude that the: law of demand has bee ...

1 norwood corp currently has accounts receivable of 1406000

1) Norwood Corp. currently has accounts receivable of $1,406,000 on net sales of $5,312,000. What are its accounts receivable turnover ratio and days’ sales outstanding (DSO)? 2) Laurel Electronics has a quick ratio of 1 ...

Given the federal reserve boardrsquos current and

Given the Federal Reserve Board’s current and forward-looking position on interest rates, predict the level of risk associated with investing in bonds and recommend a portfolio percentage for investment in bonds for a fi ...

Choose three companies you believe the first builds

Choose three companies. You believe the first builds customer value through product excellence, the second through operational excellence, and the third through customer excellence. Justify your answer.

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate