Question

Suppose that the following equations describe an economy.

*Y* = *C ^{d}* +

*C ^{d}* = 180 +
0.8(

*I ^{d}* = 140 –
8

*T* = 400

*G* = 400

(*M ^{d}*/

Assume expected inflation
*π ^{e}* = 0 and price level

- Find the equation for the
*IS*curve. - Find the equation for the
*LM*curve. - Find the equilibrium values for output and the interest rate.
- At this equilibrium, what is the level of consumption and investment?

Answer #1

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?

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?

1. You are given the following equations for the real and
monetary sectors of a specific economy;
Real Sector Equations: C = 10,000 + 0.8 (Y – T); I = 20,000 –
6000 r; G = 29,000; T = 5,000 + 0.1 Y X = 10,000; M = 5,000 + 0.1
Y.
Monetary Sector Equations: Ms = 75,000; Md = 0.5 Y – 7,000 r; Yp
= 200,000.
Here, C = Consumption; Y = GDP = Income; T = Taxes;...

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...

The production function in an economy
is Y = 2(7N-0.02N2) With this production function, the
marginal product of labor is .mpn = 14 - .08N.
Labor Supply is , N8 =
88+2w,
Desired consumption is ,
Cd=100+0.8Y -5020r -.5G,
Desired investment is
Id=100-500r
Real money demand is Md/P =
Y-2000 (r+?e)
Other variables are expected inflation
?e=.05 , government purchases G = 200,
and money supply is M = 2100
1. Find the general equilibrium values of the real wage,...

IS-LM Model (Closed Economy)
The following equations describe a small open economy.
[Figures are in millions of dollars; interest rate (i) is in
percent]. Assume that the price level is fixed.
Goods Market
Money
Market
C = 250 +
0.8YD
L = 0.25Y – 62.5i
YD = Y + TR –
T
Ms/P = 250
T = 100 + 0.25Y
I = 300 – 50i
G = 350; TR = 150
Goods market equilibrium condition: Y = C + I...

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...

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...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 18 minutes ago

asked 24 minutes ago

asked 24 minutes ago

asked 32 minutes ago

asked 51 minutes ago

asked 59 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 3 hours ago

asked 3 hours ago