Consumption function in the IS-LM model, Macroeconomics

Assignment Help:

Q. Consumption function in the IS-LM model?

The consumption function will be the same as in cross model, consumption will depend positively on Y. In the classical model, consumption relies negatively on the real interest rate. You can allow consumption to depend negatively on interest rates in the IS-LM as well. You should then write C = C(Y, R). In the literature, both variants are found but then since the results will be largely the same so we choose to let C depend on Y only, C = C(Y). We will also, for the same reason, model imports as a function of Y only albeit it may depend on R as well.


Related Discussions:- Consumption function in the IS-LM model

Price of gasoline has recently come down, The price of gasoline has recentl...

The price of gasoline has recently come down as has the quantity. Show graphically and explain what might have caused this.

explain how to solve the evacuation-route problem, You are the mayor of a ...

You are the mayor of a beautiful city by the ocean, and your city is connected to the mainland by a set of k bridges. Your city manager tells you that it is necessary to come up wi

Monopoly model, Use the monopoly model to explain how providers are able to...

Use the monopoly model to explain how providers are able to charge different groups of patients different prices.

Marginal propensity to save, Marginal Propensity to save  (MPS)  is the r...

Marginal Propensity to save  (MPS)  is the ratio of change in total saving to change in total disposable income. Symbolically,     MPS = ?S/?Y For example, total

Credit multiplier, use a numerical example to illustrate how credit multipl...

use a numerical example to illustrate how credit multiplier works

Functions of commercial bank - buying government securities, Buying ...

Buying government securities: When a commercial bank buys government bonds, the effect is substantially the same as that of lending - new money is created. To

Price of its cabernet sauvignon, When Sonoma Vineyards reduces the price of...

When Sonoma Vineyards reduces the price of its Cabernet Sauvignon from $15 a bottle to $12 a bottle, the result is an increase in a. the demand for this wine b. the supply of

How aggregate consumption increase, How much more did the average household...

How much more did the average household spend on appliances, electronics, and furniture when it received the 2008 tax rebate? (b) If all 110 million households did so, how much did

Price of beer to increase by 10 percent, A recent article estimated that th...

A recent article estimated that the elasticity of the rate of gonorrhea with respect to the price of beer is about 0.8. If this estimate is correct, are unprotected sex and beer su

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd