Consider the following IS–LM model: C = 200 + .25YD I = 150 - 1000i G = 250 T = 200 L = 2Y - 8000i M/P = 1600 Derive the equation of IS Curve. Derive the equation of LM curve. Solve for equilibrium real output and interest rate.
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Question No.3
Consider the following IS–LM model:
C = 200 + .25YD
I = 150 - 1000i
G = 250
T = 200
L = 2Y - 8000i
M/P = 1600
- Derive the equation of IS Curve.
- Derive the equation of LM curve.
- Solve for equilibrium real output and interest rate.
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- Suppose the public becomes more concerned about their future so they increase the percentage of their income devoted to savings. Based on the IS-LM model, which curve will shift and why? Predict the effects of this event on income, interest rate, consumption and investment. Income: ________________ Interest Rate: ____________ Consumption: ___________ Investment: ______________ASAP Consider the two-period real intertemporal model with investment from Chapter 11.(a) What does the aggregate supply curve, Y s, represent ? Derive the aggregate supply curve, Y s, using diagrams.In response to crisis, the Central Bank has deceased their policy rate from 13.5 % to 8% .Explain using the IS LM Model explain what should be happen to the economy???
- Does interest (nominal or real) impact the consumption function in any way? According to literature consumption in the IS-LM model is affected by changes in output Y and taxes T. But in this question as there is an i for the interest included in the equation does that mean (as I am given a nominal interest rate), use it in my calculations? Or is it just written there to test my knowledge?. Consider the following IS-LM model (all amounts are in millions of dollars): C = 50 + 0.6 YD T = 20 G = 300 I = 450 + 0.2 Y - 1500 i Derive the IS equation in the form Y = function (i, ….). The central bank sets an interest rate of 10%. What is the full SR model eqm Y? Use (M/P)d=3Y– 4000i to calculate what the real Ms is at this full SR eqm. Graph this eqm in 3 separate graphs: i-Y, i-(M/P), and Z-Y spaces. You may link these graphs up or leave them separate. Suppose Congress decides to decrease G from 300 to 295, cet. par. Provide a specific $ amount for the new eqm Y. Show this “shock,” with its appropriate name, in the 3 graphs of part b. above. Present and discuss all changes in all components of IS and LM using…Urgently need Only typed answer. Using the ISLM model, a housing market crash A. can be represented as a leftward shift of the LM curve B. causes r and Y to fall C. causes unemployment to rise D. all of the above E. none of the above
- Explain it correctly not copy paste Q)In the Real Business Cycle model, what is the effective investment and the equilibrium investment?Use the ISLM model to answer the following:a. Describe how an increase in government spending impacts the economy. b. How might the central bank respond to an increase in government spending ifit wants to hold interest rates constant?Consider an economy with the following features: Consumption, C = 130 + 0.5Yd Income tax, T = 20 + 0.2Y Investment, I = 200 – 600r Government expenditure, G = 112 Real money demand, Md/P = 50 + 0.5Y – 600r Nominal money supply, Ms = 600 Price level, P = 2 where Yd stands for disposable income, and r for the rate of interest. Derive the IS and LM equations. Calculate the equilibrium levels of income and rate of interest.
- For an IS/LM model of an economy with the following equations: C = 200 + 0.8Yd I = 220 – 25i G with bar on top = 240 stack T R with bar on top = 150 T = .2Y L = .1Y – 3i fraction numerator M with bar on top over denominator P with bar on top end fraction = 125 The equations for the IS and LM (to two decimal places) are Y= 2168.4 – 69.5i and Y = 3i + 125 Y= 2168.4 – 69.5i and Y = 30i + 1250 Y= 2168.4 + 69.5i and Y = 30i – 1250 Y= 780 – 25i and Y = 30i + 1250.Suppose that in Macroland the consumption and the investment have a negative relationship withthe real interest rate and positive relationship with Y. The Central Bank of the country targets acertain nominal interest rate and lets the money supply adjust in order to reach that interest rate.a. Draw a graph of the IS-LM model in this situation.b. Suppose that the Central Bank announces an increase of the interest rate in the future.Represent graphically the initial position of IS-LM curves. Then, show the IS-LM curves of thefuture, after the announced increase in the interest rate is implemented. (Assume that the ISis constant.).c. Suppose that agents today take into consideration the resulting income of the future whendeciding the amount of consumption and investment. Show what happens to the IS-LMcurves today after the announcement of the CB (tip: the CB is NOT increasing the nominalinterest rate today).d. The government decides to step in and avoid any deviation of Y from the initial…Consider the following IS–LM model: C = 100 + .25YD I = 50 + .25Y - 1000i G = 150 T = 100 (M/P) d = 2Y - 8000i (M/P)s = 1000 a. Derive the IS relation b. Derive the LM relation c. Solve for equilibrium real output. d. Solve for the equilibrium interest rate e. Solve for the equilibrium values of C and I f. now suppose that the money supply increases to M/P = 1010. Solve for T, f. suppose that government spending increases to G = 155 What is the value of money supply? g. From what we studied, which policy, expansionary fiscal policy or expansionary monetary policy will undoubtedly increase investment.