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 Find an expression for the LM curve.
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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
Consumption function: Ct = 16 + 0.8(Yd)t
Domestic
Investment function: It = 25 - 50rt
Nominal money supply: Mt = 1296
Find an expression for the LM curve.
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- Given the following information: - The economy is in the long-run equilibrium. - The Fundamental Equation of Monetarism is true. - The income velocity of money is constant and the money supply is fixed: v=0.15 M=5600 - The production function is Y=F (L,K) = 8×√L×√K - The endowment of resources is given by the input combination (L,K) = (49,25) A. Find the equation of the aggregate demand curve. B. What is the equation of the long-run aggregate supply curve? C. What is the equilibrium price level when the unemployment rate is at NAIRU?Assume a two-sector economy model is given by: Y = C + I, C = 97 + 0.7Y, I = 180 – 125i M s = 255, L 1 = 0.2Y, L 2 = 220 – 175i where Y is income, C is consumption, I is investment, i is rate of interest, M s is money supply, L 1 is transactionary demand for money and L 2 is speculative demand for money. a) Find the equilibrium income level and interest rate, together with equilibrium levels of C, I, L 1 and L 2 . b) Show what happens to the equilibrium conditions if autonomous investment falls from 180 to 110. c) Demonstrate your answers to (a) and (b) graphically.Assume that the money demand function is (M / P) ^ d = 2, 200 - 200r , where r is the interest rate in percent. The money supply M is 2,000 and the price level P is 2. The consumption function is given by C = 200 + 0.5(Y - T) and the investment function is I = 1.000 - 200r , where r is measured in percent , G equals 300, and T equals 200. a) What is the equilibrium level of interest rate determined at the money market?
- An economy has a constant population. Everyone’s demand for chequing deposits is5,000 goods in total in every period. The economy has a total endowment of 10,000goods per period. There is a total stock of unintermediated capital of 1,000 goods in each period. Bank deposits are the only form of money in the economy. Deposits of banks are subject to a 20 percent reserve requirement. The net real rate of return on capital is 10 percent per period. After meeting the reserve requirement, banks invest the remainder of all deposits into capital. Individuals do not hold capital. The fiat money stock is$2,000 per period. Capital takes two periods to generate final returns What is this economy’s real GDP? (A)16,050. (B)14,840. (C)11,560. (D)10,000 Can you show your workAssume that the money demand function is (M / P) ^ d = 2, 200 - 200r, where r is the interest rate in percent. The money supply M is 2,000 and the price level P is 2. The consumption function is given by C = 200 + 0.5(Y - T) and the investment function is I = 1.000 - 200r , where r is measured in percent , G equals 300, and T equals 200. Calculate the equilibrium level of output. Show the IS-LM equilibrium graphically.1.Consider the Economy of Rwanda. The consumption function is given by ?=200+0.75[?−?] while theinvestment function is ?=200−25?. Government purchases and taxes are both 100.The money demand function of Rwanda is [??⁄]?=?−100?. The nominal money supply is 100 and theprice level P is 2.i i) Derive the IS curve equation.ii ii) Draw a well labeled diagram of the IS Curve.iii iii) Derive the LM curve equation.iv iv) Draw a well labeled diagram of the LM Curve.v v) Determine the equilibrium level of income and equilibrium interest rate2.Keynes developed the concept of the multiplier with the intention of arguing that extra governmentspending on public works which is financed by a budget deficit would have a positive effect on a demanddeficient economy. However, several factors limit the application of the multiplier for an economicmanagement. Discuss3.Trade war happens when one country retaliates against another by using import tariffs or placing otherrestriction on the other country’s…
- Assume a two-sector economy model is given by: Y = C + I, C = 97 + 0.7Y, I = 180 – 125i Ms = 255, L1 = 0.2Y, L2 = 220 – 175i where Y is income, C is consumption, I is investment, i is rate of interest, Ms is money supply, L1 is transactionary demand for money and L2 is speculative demand for money. Find the equilibrium income level and interest rate, together with equilibrium levels of C, I, L1 and L2. Show what happens to the equilibrium conditions if autonomous investment falls from 180 to 110. Demonstrate your answers to (a) and (b) graphically. Assume that the demand function for a commodity is given by Qd = 3 – 0.1P and that the supply function is given by Qs = 1 + 0.05P, where P is the price, Qd is the quantity demanded and Qs is the quantity supplied. Suppose the government levies a tax of t cedis per unit sold. If the market is in equilibrium and the tax is increased, show how the price, quantity and tax revenue will change…(Please solve part a) Consider the economy of Hicksonia a) The consumption function is given by: C=300+0.6(Y-T). The investment function is: I=700-80r. Government purchases and taxes are both 500. For this economy, graph the IS curve for r changing from 0 to 8 b) The money demand function in Hicksonia is (M/P)^d=Y-200r. The money supply M is 3000 and the price level P is 3. For this economy, graph the LM curve for r changing from 0 to 8. c) Find the equilibrium interest rate r and the equilibrium level of income Y. d) Suppose that government purchases are increased from 500 to 700. How does the IS curve shift? What are the new equilibrium interest rate and level of income? e) Suppose instead that the money supply is raised from 3000 to 4500. How does the LM cruve shift? What are the new eqquilibrium interest rate and level of income? f) With the initial level values for monetary and fiscal policy, suppose that the price level rises from 3 to 5. What hpapnes? What are the new…The consumption function is given by: C = 200+0.75 (Y-T). I = 200-25r. G = T=100 The money demand function in the Malakas Country is Md = Y-100r. The Money supply M is 1000 and price is 2. For this economy graph the LM curve for ranging from 0 to 8.
- log(MDMD / P) = α + (β x i) + [γ x log(Y)] + ε The following table gives estimated coefficients for the equation you identified in the previous question: Coefficient Value α 0.10 β –0.15 γ 0.5 If the nominal interest rate rises by 4 percentage points and income rises by 2 percentage points, then ignoring the error term, the quantity of real money demanded changes by ( 10%/-15%/12%/16%) . Based on the table, the elasticity of the real money demanded with respect to income is .........Can you please help with the explanation of the below? In contemporary monetary theory, we do not normally think of using a money stock to implement monetary policy. By setting m-p, the log of the real money stock, equal to money demand y-b.i where y and i are ln(GDP) and the interest rate, create a money policy reaction function. Noting that p+y is the log of nominal GDP how could you interpret m in this case so as to make your equation approximate the reality in Australia?1. Define & explain neutrality, dichotomy & crowding-out effect. 2. Graphically demonstrate how to construct an IS(LM) curve. 3. State the product market equilibrium condition, define an IS curve and explain why it is downward sloping. 4. State the money market equilibrium condition, define an LM curve and explain why it is upward sloping.
