Consider an IS/LM model of an economy with the following equations: C = 300 + 0.6Ya I = 100 – 5i G = 200 TR = 200 T = 0.1Y L = 0.4Y - 30i M[P = 500 %3D (a) Using the above data, derive the equation for the IS schedule. (b) In this example, what is the equation for the LM schedule? Calculate the equilibrium level of income and interest rates. Sketch the IS/LM equilibrium position. (c) What are the values of the monetary policy multipliers with respect to income and interest rates? If the money supply is increased by 30, what are the new market- clearing income and interest rate levels? (d) [All calculations to two decimal points. You must report your calculations.]

Consider an IS/LM model of an economy with the following equations: C = 300 + 0.6Ya I = 100 – 5i G = 200 TR = 200 T = 0.1Y L = 0.4Y - 30i M[P = 500 %3D (a) Using the above data, derive the equation for the IS schedule. (b) In this example, what is the equation for the LM schedule? Calculate the equilibrium level of income and interest rates. Sketch the IS/LM equilibrium position. (c) What are the values of the monetary policy multipliers with respect to income and interest rates? If the money supply is increased by 30, what are the new market- clearing income and interest rate levels? (d) [All calculations to two decimal points. You must report your calculations.]

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

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