Please explain Question 1 (a) (b) (c) Precisely without confusion. Q1: AD-AS ModelBased on Abel, Bernanke and Croushore, 10th edition, Chapter 9, Numerical Problems, No. 5.Consider the following eeonomy:• Desired consumption= 1275 + 0.5(Y – T) – 200r.(1)• Desired invest mentId = 900 – 200r(2)• Real money demandL = 0.5Y – 200i(3)Full employment out put Y = 4600 and expected inflation is a = 0.(a) Suppose that T= G= 450 and that M = 9000.• Find an equation describing the IS curve.HINT: Set desired national saving and investment exqual; salve for relatkonship between r and Y• Find an equation describing the LM curve.[HINT: Set real money supply and demmand equal; solve for relatkonship between rand Y, given P.• Finally, find an equation for the aggregate demand curve.HINT: Use the IS and LM expuatiıns to find a relationship between Y and P.ECON102(b) Calculate the general equilibrium values of output, consumption, investment, the realinterest rate, and price level.(c) Suppose that T = G = 450 and that M = 4500. What is the equation for the aggregatedemand curve now? What are the general equilibrium values of output, consumption,invest ment, the real interest rate, and price level? Assume that full employment outputY is fixed.

(a) (i) In goods market, Y = Cd + Id + G Y = 1275 + 0.5(Y - 450) - 200r + 900 - 200r + 450 Y = 2625…

Q1: AD-AS Model Basad on Abel, Bernanke and Croushore, 10th edition, Chapter 9. Numerical Problems, No. 5. Consider the following economy: • Desired consumption c = 1275 + 0.5(Y – T) – 200r. (1) • Desired invest ment 1d = 900 – 200r (2) Real money dem and L = 0.5Y – 200i (3) Full employment out put Y = 4600 and expected inflation is = 0. (a) Suppose that T=G = 450 and that M = 9000. • Find an equation describing the IS curve. HINT: Set desired national saving and investament equal; salve for selatinship between rnd Y| Find an equation describing the LM curve. HINT: Set eal mcney supply and demand equal; salve for elationship between rand Y, givn P.| Finally, find an equation for the aggregate demand curve. HINT: Use the S nd LM equations to find a relatianship between Y and P

Q1: AD-AS Model Basad on Abel, Bernanke and Croushore, 10th edition, Chapter 9. Numerical Problems, No. 5. Consider the following economy: • Desired consumption c = 1275 + 0.5(Y – T) – 200r. (1) • Desired invest ment 1d = 900 – 200r (2) Real money dem and L = 0.5Y – 200i (3) Full employment out put Y = 4600 and expected inflation is = 0. (a) Suppose that T=G = 450 and that M = 9000. • Find an equation describing the IS curve. HINT: Set desired national saving and investament equal; salve for selatinship between rnd Y| Find an equation describing the LM curve. HINT: Set eal mcney supply and demand equal; salve for elationship between rand Y, givn P.| Finally, find an equation for the aggregate demand curve. HINT: Use the S nd LM equations to find a relatianship between Y and P

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Using the IS LM model, show how expansionary monetary and expansionary fiscal have same effect on output but opposite impact on interest rates. b. Derive the equations for IS and LM curves from the set of equations given below: C = 80+ 0.75Yd I = 300-200 i G is government expenditure G = 30 T = 30 where T= taxes Ms = 270 where Ms is money supply Md = 150+ 0.30Y – 300i Find the volume of investment at equilibrium . What would be the impact on investment if Money supply is increased to 300.
Consider the following closed economy in the context of the IS-LM model. The consumption function (C), the investment function (I), government purchases (G), taxes (T), the money demand function (MD), money supply (M) and the price level (P) are given as: C = 500 + 0.75(Y - T)I = 1000 - 300?G = 1000T = 1200MD = 0.5Y - 200rM = 5000P = 2 (a) Write down the equations for the IS curve and LM curve. Show your workings. (b) Solve for the short-run equilibrium output and interest rate. (c) Suppose government purchases falls, with ΔG=-175. (i) Using the Keynesian cross model, calculate the change in equilibrium output. (Hint: Use the government purchases multiplier.) (ii) Would your answer be the same if you calculate the change in equilibrium output using the IS-LM model? Briefly explain your answer. (e) Suppose the price level falls. Using an appropriate IS-LM diagram, illustrate the short-run impact of the fall in price level on the equilibrium interest rate and output. No written…
Desired consumption is Cd = 2000 + 0.9Y - 100,000r - G, and desired investment is I d = 1000 - 45,000r. Real money demand is Md/P =Y - 6000i. Other variables are πe = 0.03, G = 500, Y = 1000, and M = 2100. Required (a.) Find the equilibrium values of the real interest rate, consumption, investment, and the price level. (b.) Suppose government purchases decline to 450. What happens to the variables listed in part (a)? (c.) Suppose government purchases rise to 650. What happens to the variables listed in part (a)? (d.) What feature in this example leads to the result that you don’t need to know the amount of taxes collected by the government to find the equilibrium?
Consider the following numerical example of the IS-LM model: C = 200 + 0.25YD I = 150 + 0.25Y - 1000iG = 250 T = 200 i = .05 a. Derive the IS relation. (Hint: You want an equation with Y on the left side and everything else on the right.) b. The central bank sets an interest rate of 5%. How is that decision represented in the equations? c. What is the level of real money supply when the interest rate is 5%? Use the expression:(M>P) = 2Y - 8000i d. Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G. e. Now suppose that the central bank cuts the interest rate to 3%. How does this change the LM curve? Solve for Y, I, and C, and describe in words the effects of an expansion-ary monetary policy. What is the new equilibrium value of M/P supply? f. Return to the initial situation in which the interest rate set by the central bank is 5%. Now suppose that government spending increases to G = 400. Summarize the effects of an expansionary…
Explain whether each of the following statements is true or false : A). An increase in the ratio of cash holdings to deposits raises the money multiplier. B). If real interest rates become negative, the neoclassical model of investment predicts there is now no limit to how much capital rms want to purchase.
Consider the following numerical example of the IS-LM model: C = 200 + 0.25YD I = 150 + 0.25Y - 1000i G = 250 T = 200 i = .05 (i has a bar over it) a. Derive the IS relation. (Hint: You want an equation with Y on the left side and everything else on the right.) b. The central bank sets an interest rate of 5%. How is that decision represented in the equations? c. What is the level of real money supply when the interest rate is 5%? Use the expression:(M>P) = 2Y - 8000i d. Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G. e. Now suppose that the central bank cuts the interest rate to 3%. How does this change the LM curve? Solve for Y, I, and C, and describe in words the effects of an expansion-ary monetary policy. What is the new equilibrium value of M/P supply? f. Return to the initial situation in which the interest rate set by the central bank is 5%. Now suppose that government spending increases to G = 400. Summarize the…
Consider an economy in which the LM and IS functions are given below. Suppose the economy is purely classical so that yt=ý Then these equations can be condensed to LM mt - pt = y + c2Rt + εt, c2 < 0 IS Rt = r + Et(pt+1 - pt) + nt For simplicity, delete εt. Then assume that the monatery authority creates money according to MP mt = u0 + u1t + et Assume that et and nt are white noise and find the solution for pt and then for Rt.
Consider the following IS-LM model: C = 200 + 0.25 YD ; I = 150 + 0.25Y – 1000i ; G = 250 ;T = 200 ; (M/P)d = 2Y – 8000i ; M/P = 1600Derive the (a) IS-relation and the (b) LM-relation.Solve for the equilibrium (c) real output and (d) interest rate.(e) Solve for the equilibrium values of C and I and verify yourequilibrium output by: Y = C + I + G(f) Now suppose that the money supply increases to M/P = 1840. Solve for Y, i, C, I and describe in words the effectsof monetary expansion.(g) Set M/P to its initial value 1600. Suppose, that governmentspending increases to G=400. Summarize the effects offiscal expansion on Y, i, and C.
Macroeconomics Question 1) Given the following: Money supply is 1400, C = 120+0.7(Y-T). I = 200 – 10r, where r denotes the real interest rates, and T denotes the Taxation = 200, G = 400. The real money demand function (m/p = 0.1Y100r). Required: Calculate the equilibrium income and equilibrium rate of interest. II. If autonomous investment I0 increases by 300 calculate the investment multiplier (k) and analyze the impact on income (Y) and consumption (C).
Consider the following IS–LM model: C = 100 + .25YD I = 50 + .25Y - 1000i G = 150 T = 100 (M/P) d = 2Y - 8000i (M/P)s = 1000 a. Derive the IS relation b. Derive the LM relation c. Solve for equilibrium real output.         d. Solve for the equilibrium interest rate e. Solve for the equilibrium values of C and I f. now suppose that the money supply increases to M/P = 1010. Solve for T,    f. suppose that government spending increases to G = 155 What is the value of money supply? g. From what we studied, which policy, expansionary fiscal policy or expansionary monetary policy will undoubtedly increase investment.
Please pleaseee do this Question : For this question assume that the real money demand function is L(R, Y) = kY - hR where  k > 0 represents the sensitivity of the money demand to income and h > 0 represents the sensitivity of the money demand to the interest rate. Suppose that these sensitivity parameters are not known for the economy of Macroland and there are two possibilities: it is either i) high k and low h, or ii) low k and high h. To understand which one of these two scenarios is correct you analyze a given policy change: an increase in the overall level of taxes. Using the AA-DD model, compare and contrast the short run effects of this policy change in Macroland under these two scenarios. Explain your results intuitively.
. Consider the following IS-LM model (all amounts are in millions of dollars):                                                             C = 50 + 0.6 YD                                                             T = 20                                                             G = 300                                                             I = 450 + 0.2 Y - 1500 i                         Derive the IS equation in the form Y = function (i, ….). The central bank sets an interest rate of 10%. What is the full SR model eqm Y? Use (M/P)d=3Y– 4000i to calculate what the real Ms is at this full SR eqm. Graph this eqm in 3 separate graphs: i-Y, i-(M/P), and Z-Y spaces. You may link these graphs up or leave them separate. Suppose Congress decides to decrease G from 300 to 295, cet. par. Provide a specific $ amount for the new eqm Y. Show this “shock,” with its appropriate name, in the 3 graphs of part b. above. Present and discuss all changes in all components of IS and LM using…