Question

Consider the following IS-LM model: (1 - b)Y + i1r - a - G = i0...

Consider the following IS-LM model:
(1 - b)Y + i1r - a - G = i0 - bT (1)
c1Y = Ms + c2r (2)
where Y and r are the endogenous variables. Solve for Y and r using matrix algebra.
How are these equilibrium values affected by increases in Ms? Increases in T? (i.e.
nd the comparative statics)

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider the following IS-LM model: C=400+0.25YD I=300+0.25Y-1500r G=600 T=400 (M/P)D=2Y-1200r (M/P)=3000 1-Derive the IS relation with...
Consider the following IS-LM model: C=400+0.25YD I=300+0.25Y-1500r G=600 T=400 (M/P)D=2Y-1200r (M/P)=3000 1-Derive the IS relation with Y on the left-hand side. 2-Derive the LM relation with r on the left-hand side. 3-Solve for equilibrium real output. 4-Solve for the equilibrium interest rate. 5-Solve for the equilibrium values of C, and I, and verify the value you obtained for Y adding C, I and G. 6-Now suppose that the money supply increases to M/P=4320. Solve for Y, r, C and I...
IS: Y = 7000 + 2.5*G – 1.5*T – 500*r LM: r = [Y – 5*(MS/P)]/500...
IS: Y = 7000 + 2.5*G – 1.5*T – 500*r LM: r = [Y – 5*(MS/P)]/500 1. The AD curve of this economy, as a function of G, T, MS and P is [HINT: Note that you’ll get rid of the “500” in the denominator of the LM curve since when you plug r from the LM curve into the IS curve, you’ll have 500/500, which equals 1. Solve for Y] (a) Y = 7500 + 2.5*G – 1.5*T +...
Solve the national income model in homework by matrix inversionorby OR by Cramer’s Rule. Y =...
Solve the national income model in homework by matrix inversionorby OR by Cramer’s Rule. Y = C + I0+ G0+ (X-M) C = a + b(Y-T+R),  0<b<1   T = tY,  0<t<1 where R is transfer payments, (X-M) is net exports, and the other variables are as defined in class.
Assume the following IS-LM model: Y = C + I + G C = .8(1-t)Y t...
Assume the following IS-LM model: Y = C + I + G C = .8(1-t)Y t =0.25 I = 900 - 50i G = 800 Md = 0.25Y -62.5i Ms =500. (a)What will happen to the level of Y if G expands by 187.50? (b) What will happen to the composition of GDP? Explain and derive the numbers. (c). Was Investment crowded out? If so by how much.
Problem 2. Consider the following example of the IS-LM model: C = 340 + 0.5(Y–T) I...
Problem 2. Consider the following example of the IS-LM model: C = 340 + 0.5(Y–T) I = 400 – 1500(r + x) G = 150 T = 100 x=0.02 r = 0.04 ?e = 0.02 (1) Derive the IS equation. (2) Find the equilibrium value of Y. (3) Write down the zero lower bound constraint. Does the real interest rate of r=0.04 satisfy the constraint? (4) Suppose that the risk premium x has increased to x=0.09. (a) Derive the new...
4.Consider the following IS-LM model: C = 200+0.5 YD I = 150+0.25Y-1000i G=250 T=200 (M/P)d =...
4.Consider the following IS-LM model: C = 200+0.5 YD I = 150+0.25Y-1000i G=250 T=200 (M/P)d = 2Y-8000i M/P=1600 a. Derive the IS relation b. Derive the LM relation c. Solve for the equilibrium real output. d. Solve for the equilibrium interest rate.
Assume the following model of the economy, with the price level fixed at 1.0: C =...
Assume the following model of the economy, with the price level fixed at 1.0: C = 0.8(Y – T) T = 1,000 I = 800 – 20r G = 1,000 Y = C + I + G Ms/P = Md/P = 0.4Y – 40r Ms = 1,200 A. Write a numerical formula for the IS curve, showing Y as a function of r alone. (Hint: Substitute out C, I, G, and T.) B. Write a numerical formula for the LM...
Consider the following Keynesian (short-run) model along with the Classical (long-run) model of the economy. Labor...
Consider the following Keynesian (short-run) model along with the Classical (long-run) model of the economy. Labor Supply: Le = 11 Capital Supply: K=11 Production Function: Y-10K.3(Le).7 Depreciation Rate: &=.1 Consumption Function: C=12+.6Yd Investment Function: I= 25-50r Government Spending: G=20 Tax Collections: T=20 Money Demand Function: Ld= 2Y-200r Money Supply: M=360 Price Level: P=2 Find an expression for the IS curve and plot it. Find an expression for the LM curve and plot it. Find the short run equilibrium level of...
Consider the following numerical example of the IS-LM model: C = 100 + 0.3YD I =...
Consider the following numerical example of the IS-LM model: C = 100 + 0.3YD I = 150 + 0.2Y - 1000i T = 100 G = 200 i = 0.01 a) What is the equilibrium level out output (Y)? b) suppose the government increase spending to G=300. What is the new equilibrium level out output? c) G = 200. What is the equilibrium supply of money id the demand for money is given by (M/P)d = 2Y - 4000i?
Assume the following model of the economy, with the price level fixed at 1.0: C =...
Assume the following model of the economy, with the price level fixed at 1.0: C = 0.8(Y – T) T = 1,000 I = 800 – 20r G = 1,000 Y = C + I + G Ms/P = Md/P = 0.4Y – 40r Ms = 1,200 a. Write a numerical formula for the IS curve, showing Y as a function of r alone. b. Write a numerical formula for the LM curve, showing Y as a function of r...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT