Question

3. Using the following information about the current
economy:

C = 130 + 0.80(Y-T) where: C: consumption, Y: output

I = 680 -1200r T: taxes, I: Investment, r: real interest rate

T = 70 G: government

G = 110

(M/P) d = 0.6Y – 960r where: (M/P) d : money demand

Ms = 2364 Ms: money supply

P = 1.0 P: price level

(You must show the steps to derive these answers.)

a. Derive the equation for the IS curve for this economy.

b. Derive the equation for the LM curve for this economy.

c. Using (a) and (b), determine the equilibrium r and Y for this
economy.

d. Suppose government decides to increases taxes by 10 so that now
T=108. Derive the

new relevant equation(s), and determine the new equilibrium r and
Y.

Answer #1

An economy is initially described by the following
equations:
C = 500 + 0.75(Y - T); I = 1000 - 50r; M/P = Y - 200r;
G = 1000; T = 1000; M = 6000; P = 2;
where Y is income, C is consumption, I is investment, G is
government spending, T is taxes, r is the
real interest rate, M is the money supply, and P is the price
level.
a. Derive the IS equation and the LM...

Assume the following equations for the goods and money market of
an economy:
C = 250 + .8(Y-T)
I = 100 - 50r
T = G = 100.
Ms = 200
Md = 0.2Y – 100r
a) Derive the LM curve from the Md and Ms equations given above.
Is this upward or downward sloping? The LM curve is written as Y =
__ +/-__r.
b) Using the equation of the original IS curve and the LM curve
in part...

1. Consider an economy with the given equations.
Y=C+I+GY=C+I+G
C=112+0.6(Y−T)C=112+0.6(Y−T)
I=120−10rI=120−10r
(MP)d=Y−15r(MP)d=Y−15r
G=$35G=$35
T=$45T=$45
M=$1200M=$1200
P=3.0
a. Use the relevant set of equations to derive the IS curve and
graph it.
b. What is the equation for the IS curve?
Y =
c. Use the relevant set of equations to derive
the LM curve.
d. Calculate the equilibrium level of income (Y) and
the equilibrium interest rate (r).
Y=
r (%)=
e. Use the relevant set of equations to derive...

Assume the following equations summarize the structure of an
open economy:
C= 500 +
.9 (Y –
T)
Consumption Function
T = 300 +
.25
Y
Tax
I = 1000
– 50 i Investment equation
G =
2500
Government
Expenditures
NX = 505
Net Export
(M/P)d =
.4 Y -37.6 i Demand for Money (i= interest rate)
(M/p) s =
3000
Money Supply
5- Derive the equation for the LM curve.
6-...

Given an economy described by the following set of
equations.
Y = C(Y - T) + I(r) + G
C = 200 + 0.80(Y - T)
I = 300 - 2r
G = 400
T = 200
(M/P)d = 0.80Y - 8r
Ms = 5,600
Price-level = P = 2
What is the equilibrium level of GDP?

Given an economy described by the following set of
equations.
Y = C(Y - T) + I(r) + G
C = 200 + 0.80(Y - T)
I = 300 - 2r
G = 400
T = 200
(M/P)d = 0.80Y - 8r
Ms = 5,600
Price-level = P = 2
What is the equilibrium level of investment?

Given an economy described by the following set of
equations.
Y = C(Y - T) + I(r) + G
C = 200 + 0.80(Y - T)
I = 300 - 2r
G = 400
T = 200
(M/P)d = 0.80Y - 8r
Ms = 5,600
Price-level = P = 2
What is the equilibrium level of consumption?

Given an economy described by the following set of
equations.
Y = C(Y - T) + I(r) + G
C = 200 + 0.80(Y - T)
I = 300 - 2r
G = 400
T = 200
(M/P)d = 0.80Y - 8r
Ms = 5,600
Price-level = P = 2
What is the equilibrium level of consumption?

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...

Suppose that economy of Portugal is characterized by the
following C = 200 + 0.5 (Y - T) Represents the consumption function
I = 600 – 30 r represents the investment function G = 300
represents the public spending T = 300 represents the level of
taxation (m/p)d = y - 40 r represents the money demand function
(m/p)s = 1500 r represents the real money supply d Y represents the
global output Find the IS curve the LM curve...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 24 minutes ago

asked 27 minutes ago

asked 51 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago