Question

Suppose desired consumption and desired investment are ?? = 300 + 0.75(? − ?) − 300?...

Suppose desired consumption and desired investment are
?? = 300 + 0.75(? − ?) − 300?
T = 100 + 0.2Y
?? = 200 − 200?
G is the level of government purchases and G=600
Money demand is
?? ?
= 0.5? − 500(? + ??)
where the expected rate of inflation, ??, is 0.05. The nominal supply of money M = 133,200.
Suppose the full employment output is 2500 and the price level in the short run is 120.

1) Find the equation for the IS curve.
2) Find the equation for the LM curve.
3) Find the real interest rate and output level in the short run equilibrium [Hint: The short run equilibrium is the intersection of the IS and the LM curve]
4) Find the equation for the aggregate demand curve by using the IS and LM curve. [Hint: Use the form of the LM curve for an unspecified value of P. This aggregate demand function is measured by the solution of (1) and (2).

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 economy (with flexible exchange rate system): • Desired consumption: Cd = 300 +...
Consider the following economy (with flexible exchange rate system): • Desired consumption: Cd = 300 + 0.5Y − 2000r • Desired investment: Id = 200 − 3000r • Government purchases: G = 100 • Net export: NX = 350 − 0.1Y − 0.5e • Real exchange rate: e = 20 + 1000r • Full employment: Y ̄ = 900. • Nominal money stock: M = 4354 • Real money demand: L = 0.5Y − 200r (a) Find the equations for...
Consider an economy that is described by the following equations: C^d= 300+0.75(Y-T)-300r T= 100+0.2Y I^d= 200-200r...
Consider an economy that is described by the following equations: C^d= 300+0.75(Y-T)-300r T= 100+0.2Y I^d= 200-200r L=0.5Y-500i Y=2500; G=600; M=133,200; Pi^e=0.05. (Pi being the actual greek pi letter sign). Please solve part D and E (a) obtain the equation of the IS curve (b) obtain the equation of the LM curve for a general price level, P (c) assume that the economy is initially in a long-run (or general) equilibrium (i.e. Y=Y). Solve for the real interest rate r, and...
Consider the following economy: Planned consumption: ? = 900 + 0.5(? − ?) − 180? Planned...
Consider the following economy: Planned consumption: ? = 900 + 0.5(? − ?) − 180? Planned investment: ? = 950 − 180? Real money demand: ( ? ? ) ? = 0.5? − 180? a. (2 pts) Suppose ? = 400, ? = 450, and ? = 9,750. Find an equation for the IS curve. b. (2 pts) Find an equation for the LM curve. c. (2 pts) Find an equation for the aggregate demand curve. Express the AD curve...
Suppose the economy is described by the following equations: ​C = 350 + .7(Y – T)...
Suppose the economy is described by the following equations: ​C = 350 + .7(Y – T) ​I = 100 + .1Y - 1000i ​G = 500; T = 500 Money Supply (M/P)s = 3200 ​Money Demand (M/P)d = 2Y – 4000i a.​Write an equation for the IS relation. b.​Write an equation for the LM relation. c.​Find the equilibrium levels of Y and i. d.​Write the Aggregate Demand equation for this economy with Y as a function of P. e. ​Suppose...
2) Consider the following Keynesian model of the economy. Consumption Function: C = 12 + .6...
2) Consider the following Keynesian model of the economy. Consumption Function: C = 12 + .6 Y d, Investment Function: I = 25 − 50 r, Government Spending: G = 20, Tax Collections: T = 20, Money Demand Function: L d = 2 Y − 200 r, Money Supply: M = 360, Price Level: P = 2. a) Find an expression for the IS curve and plot it. b) Find an expression for the LM curve and plot it. c)...
Assume that the consumption function is given by Ct = 150 + 0.75(Yt – T) I...
Assume that the consumption function is given by Ct = 150 + 0.75(Yt – T) I = 250; G = 500; T = 500 (2 point) Write down the planned expenditure as a function of current output/income (Yt): PE (Yt+1) = ____________________________________. (4 points) What is the equilibrium level of income? Show your work. (4 points) If G increases to 550, what is the new equilibrium level of income? Show your work. Given Yt+1=Ct+I+G Ct=50+0.8(Yt-T) I = 200 – 5r...
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?
1. In the short-run IS-LM model with income taxation, taxes are given by ?=? +??. Suppose...
1. In the short-run IS-LM model with income taxation, taxes are given by ?=? +??. Suppose that MPC = 0.75 and the marginal tax rate ?=0.2. Then, when ? decreases by 1000, then for any given interest rate, the IS curve shifts: Select one: a. to the left by 1000. b. to the right by 3000. c. to the right by 3750 d. to the right by 1875. 2. Suppose that the adult population in an economy is 28 million,...
Consumption function: C= 12 + 0.6(YD) Government spending: G= 20, Investment function: I= 25-50r, Tax collections:T=20,...
Consumption function: C= 12 + 0.6(YD) Government spending: G= 20, Investment function: I= 25-50r, Tax collections:T=20, Domestic price level: P = 2, Nominal money supply: MS= 360, Real Money Demand: L(r,Y)=2Y-200r, Production function: Y=N, Labor supply: N=100 (a) Find an expression for the IS curve. Y = C + I + G + NX since there is no foreign sector in the above question, NX = 0. The equation becomes: Y = C + I G Y = 12 +...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT