Assume you have the following model (use interest rates as a whole numbers): C = 200 + (0.8)Yº YO = Y - TA + TR TR = 60 | = 300 - 4.4i G = 100 Xnet = X - M = -120 TA = (0.3)Y Find the equation of the IS curve. What is the value of the multiplier here? Sketch your IS curve. a. b.
Assume you have the following model (use interest rates as a whole numbers): C = 200 + (0.8)Yº YO = Y - TA + TR TR = 60 | = 300 - 4.4i G = 100 Xnet = X - M = -120 TA = (0.3)Y Find the equation of the IS curve. What is the value of the multiplier here? Sketch your IS curve. a. b.
Chapter10: Income And Expenditures Equilibrium
Section: Chapter Questions
Problem 11E
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Transcribed Image Text:Assume you have the following model (use interest rates as a whole numbers):
| = 300 - 4.4i
2.
= 200 + (0.8)Y
Y° = Y - TA + TR
G
100
%3D
Xnet = X- M = -120
TA = (0.3)Y
TR = 60
Find the equation of the IS curve.
What is the value of the multiplier here?
Sketch your IS curve.
Now suppose you are given the following information for the money market:
(M/P) = L = .25Y - 5i and (M1/P) = $240. Find the equation of the LM curve. Sketch your LM curve
on the same graph as your IS curve.
Find the equilibrium interest rate and income for this economy.
Now suppose government spending rises $132 (i.e., G now eqals $232). What is the new equation
of the IS curve? Show what happens on your graph (just sketch it).
Find the new equilibrium interest rate and income.
а.
b.
С.
d.
е.
f.
g.
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