2. Macro economy, diagram is the IS-LM using the four- quadrant diagrams. a. Show what will happen if the money supply is doubled using the diagram. b. How is the IS-LM framework used to obtain the AD function and why it is not the same as a market demand curve. c. Show a diagrammatic example of AS-AD and its equilibrium. What does this equilibrium mean?

2. Macro economy, diagram is the IS-LM using the four- quadrant diagrams. a. Show what will happen if the money supply is doubled using the diagram. b. How is the IS-LM framework used to obtain the AD function and why it is not the same as a market demand curve. c. Show a diagrammatic example of AS-AD and its equilibrium. What does this equilibrium mean?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 5SCQ: Suppose the U.S. Congress passes significant immigration reform that makes it more difficult for...

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Consider the following economy: Labor supply: Nt= 90 Capital stock: Kt = 90 Government spending: Gt = 20 Tax collections: Tt = 20 Production function: Yt = 2(Kt)0.5 (Nt)0.5 Real money demand Lt = 2Yt - 200rt Consumption function: Ct = 16 + 0.8(Yd)t Domestic price level: Pt = 4 Investment function: It = 25 - 50rt Nominal money supply: Mt = 1296 Plot (a)-(d) on the IS-LM and AD-SRAS-LRAS diagrams. Make sure to label (i) the axes, (ii) the curves and (iii) the initial equilibrium levels.
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