Financial payments technology, Applied Statistics

Suppose the money supply process is now represented by the following function:

250_Financial payments technology.png

where m measures the sensitivity of money supply with respect to the interest rate.

(i) Using this money supply specification, together with the money demand function in equation derive a new LM function and curve as L1M1; and,

(ii) Use this new LM function/curve together (and overlay or in the same diagram) with the IS and LM functions/curves derived in parts (a) and (b) of question 1 as I0S0 and L0M0 to explain and show quantitatively and graphically the relative efficacy of a cut of the income tax rate to 15%.


With the aid of the money market and the IS-LM fixed-price framework, model algebraically and graphically the key macroeconomic impact effects of an improvement financial payments technology.

Posted Date: 3/7/2013 2:36:42 AM | Location : United States

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