Question

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 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 decreases, 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 = 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...
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 = 0.8(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 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...
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...
Assume that the consumption function is given by C = 200 + 0.75(Y ? T). Government...
Assume that the consumption function is given by C = 200 + 0.75(Y ? T). Government purchases and taxes are both 100. Planned investment is derived as follows: there are many ideas, whose cost of implementation are all 3. Ideas are indexed by j > 0. Idea j produces j units of return next year. Index j follows an exponential distribution on (0, ?) with density 100e ?j , j > 0. Derive the IS curve.
Suppose that economy of Portugal is characterized by the following C = 200 + 0.5 (Y...
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...
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...
1. Suppose an economy is described by the consumption function C=1,100+.8(Y-T), I= 2,000-200r, T=1,000, G=1,300, Y=15,000....
1. Suppose an economy is described by the consumption function C=1,100+.8(Y-T), I= 2,000-200r, T=1,000, G=1,300, Y=15,000. What is the equilibrium real interest rate? 2. Consider the following data for a closed economy: Y = $20 trillion C = $12 trillion T = $6 trillion Spublic = $2 trillion A. What is the level of private savings for this economy? B. What is the level of Government Purchases for this economy? C. What is the level of investment for this economy?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT