Assume the following model of the economy:Y = C + I + GC = 120 + 0.5(Y - T)I = 100 - 10rG = 50T = 40Md = Y - 20 rMs = 600P = 2Graph both the IS and the LM curves. Use r = 5, 10, 15 andUse the IS-LM model to predict the short-run effects of the shocks on income when: after the invention of a new high speed computer chip, many firms decide to upgrade their computer.

Answered: Assume the following model of the…

Macroeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506756

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter10: Dynamic Change, Economic Fluctuations, And The Ad-as Model

Section: Chapter Questions

Problem 1CQ

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Assume the following model of the economy:

Y = C + I + G

C = 120 + 0.5(Y - T)

I = 100 - 10r

G = 50

T = 40

Md = Y - 20 r

Ms = 600

P = 2

Graph both the IS and the LM curves. Use r = 5, 10, 15 and
Use the IS-LM model to predict the short-run effects of the shocks on income when: after the invention of a new high speed computer chip, many firms decide to upgrade their computer.

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