Question

Assume that the consumption function is given by C = 100 + 0.5(Y – T) and...

Assume that the consumption function is given by C = 100 + 0.5(Y – T) and the investment function is I = 1,000 – 100r, where r is measured in percent, G equals 200, and T equals 100.

a. What is the numerical formula for the IS curve? (Hint: Substitute for C, I, and G in the equation Y = C + I + G and then write an equation for Y as a function of r or r as a function of Y.) Express the equation two ways.

b. What is the slope of the IS curve? (Hint: The slope of the IS curve is the coefficient of Y when the IS curve is written expressing r as a function of Y.)

c. If r is one percent, what is I? What is Y? If r is 3 percent, what is I? What is Y? If r is 5 percent, what is I? What is Y?

d. If G increases, does the IS curve shift upward and to the right or downward and to the left?

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
Assume that the consumption function is given by C = 200 + 0.5(Y – T) and...
Assume that the consumption function is given by C = 200 + 0.5(Y – T) and the investment function is I = 1,000 – 200r, where r is measured in percent, G equals 300, and T equals 200. A. What is the numerical formula for the IS curve? (Hint: Substitute for C, I, and G in the equation Y = C + I + G and then write an equation for Y as a function of r or r as...
The IS Curve: Assume that the consumption function is given by C= 2000 + 0.6(Y– T)...
The IS Curve: Assume that the consumption function is given by C= 2000 + 0.6(Y– T) and the investment function is I= 4,000 – 200r, where r is measured in percent, G equals 3000, and T equals 2000. a) What is the numerical formula for the IS curve? (Hint:Substitute for C, I, and G in the equation Y= C + I + G and then write an equation for Y as a function of r or r as a function...
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 = 0.6(Y – T) T = 40 I = 120 – 30r G = 40 Y = C + I + G Ms/P = Md/P = 2Y – 50r Ms = 280 Write a numerical formula for the IS curve, showing Y as a function of r alone. (Hint: Substitute out C, I, G, and T.) Write a numerical formula for the LM curve, showing...
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...
Assume the following equations for the goods and money market of an economy: C = 250...
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...
2. Assume that the equilibrium in the money market may be described as M/P = 0.5Y...
2. Assume that the equilibrium in the money market may be described as M/P = 0.5Y – 100r, and M/P equals 800. this is one question unfortunately. Write the LM curve two ways, expressing Y as a function of r and r as a function of Y. What is the slope of the LM curve? If real money balance M/P increases to 1200, what is a new LM curve? Graphically illustrate LM curve from part a and new LM curve...
In the Keynesian Cross, assume that the consumption function is given by: C = 200 +...
In the Keynesian Cross, assume that the consumption function is given by: C = 200 + 0.8 (Y-T). Assume that: I = I ̅= 100, G = G̅ =100, T = T̅ =100. a) Use graphical analysis to demonstrate the determination of equilibrium income. b) What is the equilibrium level of income? c) If government spending increase to 125, what is the new equilibrium income? d) Now instead of assuming T = T̅ , assume that T = T̅ +...
1) If the consumption function is given by C = 500 + 0.5( Y – T),...
1) If the consumption function is given by C = 500 + 0.5( Y – T), and Y is 8,000 and T is given by T = 200 + 0.2 Y, then C equals: A. 2,400. B. 2,800. C. 3,600. D. 4,200. 2) The real interest rate is the: A. nominal interest rate corrected for the rate of inflation. B. rate of interest actually paid by banks. C. rate of inflation minus the nominal interest rate. D. rate of interest...
Equilibrium Values and Saving Assume that GDP (Y) is 5,000. Consumption (C) is given by the...
Equilibrium Values and Saving Assume that GDP (Y) is 5,000. Consumption (C) is given by the equation C = 1,000 + 0.3(Y – T). Investment (I) is given by the equation I = 1,500 – 50r, where r is the real interest rate in percent. Taxes (T) are 1,000. Government spending (G) is 1,500. What are the equilibrium values of C, I, and r? What are the values of private saving, public saving, and national saving? Now assume there is...
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