For an economy the following functions are given : C = 100 + 0.8 y S = - 100 + 0.2 y I= 120 - 5 i M= 120 Md = 0.2y- 5i %3D Find out (1) IS equation, (2) LM equation, (3) equilibrium level of income and interest rate
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- Need answer. Absuletly upvote!! A. Graphically derive the IS curve from the goods market equilibrium. Hint: start from equilibrium in goods market and the analyze the effect of a change in interest rate i on Y.Let the equilibrium condition for national income be ?(?) + ?(?) = ?(?) + ? (? ′ , ? ′ ,? ′ > 0; ? ′ + ? ′ > ? ′ ) Where S, Y, T, I and G stand for saving, national income, taxes, investment and government expenditure respectively. All derivatives are continuous a. Interpret the economic meaning of the derivatives ? ′ , ? ′&? ′ b. Check whether the conditions for the implicit function theorem are satisfied. If so, write the equilibrium identity c. Find ??̅ ?? and discuss its economic implications(A) Derive the equation for the IS curve and LM curve. (B) Compute the equilibirum levels of income, Y and interest rates.
- Consider an economy with the following information: Y = C + I + G, C=180+0.7( Y-T), I= 100-18i + 0.1 Y, T =400, G=400, P=1, M=5400, L=6Y -120i, M/P=L Derive the IS equation. Derive the LM equation. Solve the IS-LM to obtain the equilibrium output and the interest rateFor an IS/LM model of an economy with the following equations: C = 200 + 0.8Yd I = 220 – 25i G bar = 240 TR bar= 150 T = .2Y L = .1Y – 3i M bar / P bar =125 The equilibrium interest rate and output combination is (9.2, 1526) (69.5, 2168.4) (30, 1250) (3, 125)For an economy the following functions have been given:C = 100 + 0.8YS = -100 + 0.2YI = 120 – 5rMs = 120Md = 0.2Y – 5rCalculate the following:5.1.1. IS equation 5.1.2. LM equation 5.1.3. Equilibrium level of income 5.1.4. Equilibrium level of interest rate. 5.1.5 Calculate National saving. 5.1.6 Calculate money demand 5.1.7 Find consumption
- Drive the is curve mathematically anf graphically when investment function is more sensitive to rate of interestLinear equations for the consumption and saving schedules take the general form C = a + bY and S = -a + (1 - b)Y, where C, S, and Y are consumption, saving, and national income, respectively. The constant a represents the vertical intercept, and b represents the slope of the consumption schedule.a. Use the following data to substitute numerical values for a and b in the consumption and saving equations. b. What is the economic meaning of b? Of (1 - b)? c. Suppose that the amount of saving that occurs at each level of national income falls by $20 but that the values of b and (1 - b) remain unchanged. Restate the saving and consumption equations for the new numerical values, and cite a factor that might have caused the change.Assume the following model of the economy: Y = C + I + G C = 120 + 0.5(Y - T) I = 100 - 10r G = 50 T = 40 Md = Y - 20 r Ms = 600 P = 2 Graph both the IS and the LM curves. Use r = 5, 10, 15 What are the equilibrium level of income and equilibrium interest rate?
- Suppose that the real interest rate is 6%. Next, assume that some factors changes, such that the expected rate of return, declines by  two percentage points at each prospective level of investment. Assuming no change in the real interest rate, by how much and in what direction will the investment change?  which of the following might cause this change: (a) a decision to increase inventories; (b) an increase in excess production capacity.Assume a set of well-behaved (i.e. strictly monotone and strictly convex) intertemporal indifference curvesbetween period 1 and 2. Then suppose that the nominal interest rate r decreases. Explain what happens to thenew interior solution if current and future consumption are normal and inferior goods, respectively.The following equations describe an economy. Y=C+I+G C=120+0.6(Y-T) I=100-10r, G=60 T=40 M/P=Y-20r. M=600 P=20 a. Derive the equations for IS and LM curves. b. Find the equilibrium level of income and the equilibrium interest rate. c. Suppose government expenditure increases by 50%. Find the equilibrium interest rate and income.