Discuss in detail the effects of the following factors on the position of IS curve. 1- Wealth; 2-expected income; 3-government purchase; 4-Taxes; 5-technology
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Discuss in detail the effects of the following factors on the position of IS curve.
1- Wealth; 2-expected income; 3-government purchase; 4-Taxes; 5-technology;
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- Natural disasters: Suppose a large earthquake destroys many houses and build-ings on the West Coast but fortunately results in little loss of life. Show how to think about this event using the IS curve.The equation for the IS curve is (note that α corresponds to alpha as defined in the lecture notes) Y = A-bar x 1/(1-b(1-t)+m) Y = C+I+G+NX Y = αA-bar- αdi Y = 1/k(hi+M/P) Y = I-bar-diSuppose that when the interest rate on loans is 16 percent, businesses find it unprofitable to invest in machinery and equipment. However, when the interest rate is 14 percent, $5 billion worth of investment is profitable. At 12 percent interest, a total of $10 billion of investment is profitable. Similarly, total investment increases by $5 billion for each successive 2-percentagepoint decline in the interest rate. Describe the relevant relationship between the interest rate and investment in a table, on a graph, and as an equation. Put the interest rate on the vertical axis and investment on the horizontal axis. In your equation use the form i = a + bI, where i is the interest rate, a is the vertical intercept, b is the slope of the line (which is negative),and I is the level of investment.
- what relationship does IS curve plot? explain in words and graphically, why IS curve slops downward.List 4 factors that will cause the IS curve to shift to the right.Give an economic relationships ( with one response and one explanatory variable) in which correlation is possible. Discuss why autocorrelation exist in the relationship.
- If an economic curve has a negative slope, then one variable _______falls as the other rises.has a smaller value than another variable.changes after another variable.changes at a slower rate than another.Name and discuss the factors that shift the IS Curve. Give two examples, with the help of a diagram, of IS curve shifting, one to the left and one to the right.In the set of the IS curve analysis, which of the following is an endogenous variable? Investment quantity Real interest rate Nominal interest rate Money supply quantity
- explain and illustrate laffer curveIf the turning points of an economic variable occur after the turning points of economic activity, then the economic variable is called a . a procyclical variable b . a countercyclical variable c. an acyclical variable d . a leading variable e . a coincident variable f . a lagging variableConsider the following data on the X-product: a) What was the growth rate of nominal GDP between 2010 and 2011? b) What was the growth rate of the GDP deflator between 2010 and 2011? c) What was real GDP in 2010 measured in 2005 price? d) What was real GDP in 2011 measured in 2005 price? e) What was the growth rate of real GDP between 2010 and 2011? f) Was the growth rate of nominal GDP higher or lower than the growth rate of real GDP? Explain.
