Consider the national income model below0 <acƏyY C(Y)-I(i) Go=0kY + L(i) — Mso = 0< 1;aldi< 0;ƏLdi< 0; k = positive constant Suppose that while demand for money still depends on Y as specified, it is now no longer affectedby the interest rate.• How should the system of equations above be revised?• Write the new Jacobian and call it J'. Is |J'| numerically (in absolute value) larger or smaller than|J|?• Find the new comparative static derivatives

National income models can be used to explore characteristics impacting economic expansion,…

Answered: Consider the national income model…

Consider the national income model below 0< ac ΟΥ Y C(Y)-I(i)- Go=0 kY + L(i) - Mso 1; al di < 0; ƏL di = 0 < 0; k = positive constant

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter5: National Income Accounting

Section: Chapter Questions

Problem 9E

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Factor Models

Many attributes might be related to an asset's risk, including market capitalization (size), dividend yield, growth, price-earnings ratio, etc. The use of these traditional descriptors, however, presents a few problems:

Question

Consider the national income model below
0 <
ac
Əy
Y C(Y)-I(i) Go=0
kY + L(i) — Mso = 0
< 1;
al
di
< 0;
ƏL
di
< 0; k = positive constant

Suppose that while demand for money still depends on Y as specified, it is now no longer affected
by the interest rate.
• How should the system of equations above be revised?
• Write the new Jacobian and call it J'. Is |J'| numerically (in absolute value) larger or smaller than
|J|?
• Find the new comparative static derivatives

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Step 1: National income model, a brief intro

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Step 2: First part-revision of the equation(s)

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Step 3: Second part-New Jacobian J'

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Step 4: Third part-derivatives of the new comparative statics

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