1- Consider the following IS-LM model:I= 150 + 25Y - 1000i,(M/P 2Y 8000i,G=250,T= 200C=200 + 25YD.NX 0,M/P = 1600.a) Derive the IS relationb) Derive the LM relation.c) Solve for equilibrium real output (Y*).d) Solve for the equilibrium interest rate (i*)e) Solve for the equilibrium values of C and I, and verify the value you obtained for Y byadding C, I, and G.) Now suppose that the money supply increases to M/P =1,840. Solve for Y, i c, and T, anddescribe 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 spendingincreases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, 1. C.h) The expansionary fiscal policy in part (g) have resulted in large budget deficit (T= G =200 – 400 = -200). Suggest a policy mix to decrease fiscal deficit to achieve a balancedbudget (T = G = 0).b(Ctrl) -立

1- Consider the following IS-LM model: I= 150 + 25Y - 1000i, (M/P)=2Y - 8000i, G=250, T=200. C=200 + 25YD NX = 0 M/P = 1600. %3D a) Derive the IS relation b) Derive the LM relation c) Solve for equilibrium real output (Y*).

1- Consider the following IS-LM model: I= 150 + 25Y - 1000i, (M/P)=2Y - 8000i, G=250, T=200. C=200 + 25YD NX = 0 M/P = 1600. %3D a) Derive the IS relation b) Derive the LM relation c) Solve for equilibrium real output (Y*).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the following IS–LM model: C = 100 + .25YD I = 50 + .25Y - 1000i G = 150 T = 100 (M/P) d = 2Y - 8000i (M/P)s = 1000 a. Derive the IS relation b. Derive the LM relation c. Solve for equilibrium real output.         d. Solve for the equilibrium interest rate e. Solve for the equilibrium values of C and I f. now suppose that the money supply increases to M/P = 1010. Solve for T,    f. suppose that government spending increases to G = 155 What is the value of money supply? g. From what we studied, which policy, expansionary fiscal policy or expansionary monetary policy will undoubtedly increase investment.
Suppose the public becomes more concerned about their future so they increase the percentage of their income devoted to savings. Based on the IS-LM model, which curve will shift and why? Predict the effects of this event on income, interest rate, consumption and investment.            Income:   ________________ Interest Rate: ____________ Consumption: ___________ Investment: ______________
. Consider the following IS-LM model (all amounts are in millions of dollars):                                                             C = 50 + 0.6 YD                                                             T = 20                                                             G = 300                                                             I = 450 + 0.2 Y - 1500 i                         Derive the IS equation in the form Y = function (i, ….). The central bank sets an interest rate of 10%. What is the full SR model eqm Y? Use (M/P)d=3Y– 4000i to calculate what the real Ms is at this full SR eqm. Graph this eqm in 3 separate graphs: i-Y, i-(M/P), and Z-Y spaces. You may link these graphs up or leave them separate. Suppose Congress decides to decrease G from 300 to 295, cet. par. Provide a specific $ amount for the new eqm Y. Show this “shock,” with its appropriate name, in the 3 graphs of part b. above. Present and discuss all changes in all components of IS and LM using…
. In the IS-LM model, what is the effect of an increase in government purchases? Draw an IS-LM diagram to illustrate. In this question, it is not necessary to include the FE line. a) What is the effect on output and the real interest rate? b) What is the effect on investment spending? c) If the LM curve had been horizontal, explain how your answers to a and b would have been different.
D7) IS-LM Model: Based on your understanding of the IS-LM model, graphically illustrate and explain what effect a monetary expansion will have on output, the interest rate, and investment. ( Properly)
Consider an IS-LM model. Suppose the central bank increases the money supply by 5 percent. But the price level also increases increase by 10 percent. Part 1What will be the change in LM curve? What will be the change in equilibrium interest rate and output? Explain properly using a graph?Part 2What will be the change in the AD curve? (Hint: first derive the AD curve from IS-LM model and then consider whether AD will shift to the left or right given the change in LM curve) Given that the SRAS curve is horizontal, what will be the impact of change in AD on price level?
I have to analyze, using the IS-LM model, the macroeconomiceffects of an increase in savings in the short term and its implications for long-term growth. Specifically, I have to suppose that households (consumers) lose confidence and start saving more for any level of disposable income. In terms of total savings and, therefore, of potential long-term growth, is a flat LM curve or a positive sloping LM curve better, in which investment was assumed to be exogenous?
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Urgentttt!!! Use the IS-LM model to answer this question. Suppose there is a simultaneous increase in government spending and reduction in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix will have on investment? Explain.
Consider an economy with the following information: Y = C + I + G, C=180+0.7( Y-T), I= 100-18i + 0.1 Y, T =400, G=400, P=1, M=5400, L=6Y -120i, M/P=L Derive the IS equation. Derive the LM equation. Solve the IS-LM to obtain the equilibrium output and the interest rate
Suppose that in Macroland the consumption and the investment have a negative relationship withthe real interest rate and positive relationship with Y. The Central Bank of the country targets acertain nominal interest rate and lets the money supply adjust in order to reach that interest rate.a. Draw a graph of the IS-LM model in this situation.b. Suppose that the Central Bank announces an increase of the interest rate in the future.Represent graphically the initial position of IS-LM curves. Then, show the IS-LM curves of thefuture, after the announced increase in the interest rate is implemented. (Assume that the ISis constant.).c. Suppose that agents today take into consideration the resulting income of the future whendeciding the amount of consumption and investment. Show what happens to the IS-LMcurves today after the announcement of the CB (tip: the CB is NOT increasing the nominalinterest rate today).d. The government decides to step in and avoid any deviation of Y from the initial…
Suppose in a closed economy, an unexpected pandemic discourages household consumption.i. Use the IS-LM model to explain its effects on interest rate, investmentand output level in the short run.