Use the following versions of the IS-LM model to answer all sections:Question: a. Determine the IS function and its slope. b. Determine the LM function and its slope. Consumption:C = 1400 + .75*Yd + .08*(M/P)Net Exports:NX= 400 - .25*Yd – 10*rTaxes:T= -200 + .2*YYd = Y - T| = 140 – 30*rG = 200 - .2*(Y – Yp)AD = C + |+ G + NXDisposable Income:Investment:Governmental Purchases:where Yp = potential GDPAggregate Demand:Goods Market EquilibriumY = ADMoney Demand:Money Market EquilibriumMd/P = .25*Y – 50*rM = MdEndogenous VariablesC, Yd, NX, r,T,AD,Y,I,Md,GExogenous VariablesҮр, Р.М

Answered: Image /qna-images/answer/6a73cd13-a012-4784-81a4-711487d24f00.jpg

Consumption: C = 1400 + .75*Yd + .08*(M/P) Net Exports: Тахes: NX= 400 - .25*Yd – 10*r T = -200 + .2*Y Disposable Income: Yd = Y - T | = 140 – 30*r G = 200 - .2*(Y – Yp) AD = C +|+ G + NX Investment: Governmental Purchases: where Yp = potential GDP Aggregate Demand:

Consumption: C = 1400 + .75Yd + .08(M/P) Net Exports: Тахes: NX= 400 - .25Yd – 10r T = -200 + .2Y Disposable Income: Yd = Y - T | = 140 – 30r G = 200 - .2*(Y – Yp) AD = C +|+ G + NX Investment: Governmental Purchases: where Yp = potential GDP Aggregate Demand:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Problem 1QTC

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Question

Use the following versions of the IS-LM model to answer all sections: Question: a. Determine the IS function and its slope. b. Determine the LM function and its slope.

Consumption:
C = 1400 + .75*Yd + .08*(M/P)
Net Exports:
NX= 400 - .25*Yd – 10*r
Taxes:
T= -200 + .2*Y
Yd = Y - T
| = 140 – 30*r
G = 200 - .2*(Y – Yp)
AD = C + |+ G + NX
Disposable Income:
Investment:
Governmental Purchases:
where Yp = potential GDP
Aggregate Demand:
Goods Market Equilibrium
Y = AD
Money Demand:
Money Market Equilibrium
Md/P = .25*Y – 50*r
M = Md
Endogenous Variables
C, Yd, NX, r,T,AD,Y,I,Md,G
Exogenous Variables
Үр, Р.М

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