Reference no: EM13903838 , Length: word count:500
In an economy, consumption is C = 30 + 1/2 (Y-T); investment is I = 25 - 110 i; tax revenue is T = 20; and government expenditure is G = 20. Y is the level of real output. The demand for real money balances, M/P, is Y i-1. The interest rate is set at 4% (i.e., i = 0.04) by the central bank. The price level, P, is constant at 1.
(a) Derive the equation of the IS curve and roughly sketch it in a diagram.
(b) Roughly sketch the LM curve, and show the short-run equilibrium.
(c) Compute the goods market multiplier.
(d) Compute the short-run equilibrium levels of output, consumption and investment.
(e) If the central bank raised the interest rate to 6%, compute the new level of output.
(f) If G rose to 25, and i remained at 6%, compute the new level of output.
Additional information
The problem related to Economics and it discusses about deriving an equation of the IS curve and drawing a diagram.
|
Short-term profit maximization
: 1. How does the theory of the firm differ from short-term profit maximization? Why is the former superior to the latter? 2. What effect would each of the following have on the value of the firm? explain.
|
|
What is political organization
: How do Marx, Dewey, Hayek, Sandel, Stout, and Chatterjee think about the following questions? What is political organization?Is it a good thing, a bad thing, (or a little of both) - Why?
|
|
Compare and contrasteconomic rational choice theory
: Compare and contrasteconomic rational choice theory with sociological strain theory. Economicrational choice theory is the foundation of neoclassical micro andmacroeconomics . Sociological strain theory was originally formulated by RobertMerton in "S..
|
|
Calculate the companys basic and diluted earnings per share
: Spriggins Company is a small biotechnology company specialising in the development of new varieties of vegetable and field crop seeds. Calculate the company's basic and diluted earnings per share for x3.
|
|
Compute the goods market multiplier
: Derive the equation of the IS curve and roughly sketch it in a diagram and roughly sketch the LM curve, and show the short-run equilibrium - Compute the goods market multiplier
|
|
Attending the oum and their next best alternative
: All Open University Malaysia (OUM) Students are identical and they are all indifferent between attending the OUM and their next best alternative. Students eat are the student union.
|
|
An essay of at least two well-developed paragraphs
: In an essay of at least two well-developed paragraphs, discuss real and nominal GDP. Point out how they are alike and how they differ. Also, explain the problem with using nominal GDP to measure the growth of the economy.
|
|
Draw up a balance sheet for the goliath motors group
: Draw up a balance sheet for the Goliath Motors group at 31 December 20x2, showing current and fixed assets, current and long-term liabilities and shareholders' equity.
|
|
Conventional macroeconomic analysis suggests
: Conventional macroeconomic analysis suggests that a tax cut should cause a nation's currency to appreciate. Discuss the channel through which this occurs.
|