II. Using the Keynesian IS-LM framework for a closed economy, analyze the effects of each of the following measures/shifts/shocks on the equilibrium levels of aggregate income and interest rate. Illustrate your answer for each of the three cases (A, B and C) with properly labeled diagram. Do not combine the three events; answer each one separately. А. The Fed decreases the discount rate Investment becomes less sensitive to interest rate (i.e., interest elasticity of investment decreases) В. С. Money demand becomes less sensitive to interest rate (i.e., interest elasticity of money demand decreases)
II. Using the Keynesian IS-LM framework for a closed economy, analyze the effects of each of the following measures/shifts/shocks on the equilibrium levels of aggregate income and interest rate. Illustrate your answer for each of the three cases (A, B and C) with properly labeled diagram. Do not combine the three events; answer each one separately. А. The Fed decreases the discount rate Investment becomes less sensitive to interest rate (i.e., interest elasticity of investment decreases) В. С. Money demand becomes less sensitive to interest rate (i.e., interest elasticity of money demand decreases)
Chapter17: Capital And Time
Section: Chapter Questions
Problem 17.2P
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i need 3 question solution other pic is just for reference of graph and this is LM and IS data
In goods
Y = 130 + 0.8(Y - 380) + 160 - 10r + 310 [as YD = Y - T]
Y = 600 + 0.8Y - 304 - 10r
0.2Y = 296 - 10r
Y = 1,480 - 50r...........(IS schedule)
In
75 + 0.12Y - 10r = 195
0.12Y = 120 + 10r
Y = 1,000 + 83.33r..........(LM schedule)
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