QUESTION ONEAssume the following functions are for the goods market of a hypothetical economy:(1) I= 150 – 10r;(2) C=700+0.8Yd(3) T=50+0.25Y(4) G=180Note: Y is income and r is the interest ratea) Derive the IS aurve for this economy.b) Use appropriate scale to sketch the IS aurve is part (a) above.c) Determine and interpret the slope of the IS aurve in part a) above.d) Explain how a change in each of the following will affect the IS curve in part a)above:A balance budget increase in government expenditure of 60 units.An increase autonomous consumption to 800 unitsAn increase in the interest sensitivity of investment to 20.An increase in the marginal propensity to save to .025.A decrease in the marginal tax rate to 0.15.i)ii)iii)iv)

IS curve shows the goods market equilibrium. It shows the interest rate levels at which investment…

Assume the following functions are for the goods market of a hypothetical economy: (1) I = 150 - 10r; (2) C=700+0.8Yd (3) T=50+0.25Y (4) G=180 Note: Y is income and r is the interest rate a) Derive the IS aurve for this economy. b) Use appropriate scale to sketch the IS aurve is part (a) above. c) Determine and interpret the slope of the IS aurve in part a) above.

Assume the following functions are for the goods market of a hypothetical economy: (1) I = 150 - 10r; (2) C=700+0.8Yd (3) T=50+0.25Y (4) G=180 Note: Y is income and r is the interest rate a) Derive the IS aurve for this economy. b) Use appropriate scale to sketch the IS aurve is part (a) above. c) Determine and interpret the slope of the IS aurve in part a) above.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 5SCQ: How to Measure Changes in the Cost of Living introduced a number of different price indices. Which...

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