Calculate the effect of the change in government spending

Assignment Help Microeconomics

Reference no: EM133918461

Problem

Consider the following IS/LM Model discussed in the class. y = -σ [i - π e ] + g0 + δe, σ > 0, δ > 0 (IS) m = y - λi, λ > 0, (LM) e = i ∗ - i (IP) where π e is a expected inflation, g is a government spending, m is money supply, and e is the nominal exchange rate, respectively.

1. Calculate the equilibrium interest rate, exchange rate and output level.

2. Assume that g is constant. Calculate the effect of the change in the money supply on the equilibrium interest rate exchange rate and output level. Calculate the effect of the change in the government spending on the equilibrium interest rate, exchange rate and output level. D. Assume that m and g are constant.

3. Assume that m is constant. Calculate the effect of the change in the government spending on the equilibrium interest rate, exchange rate and output level.

4. Assume that m and g are constant. Calculate the effect of the change in the foreign interest rate on the equilibrium interest rate, exchange rate and output level.

Reference no: EM133918461

Questions Cloud

Discuss the linkage between transport costs and trade : Discuss linkage between transport costs and international trade in demand modelling. Evaluate importance of integrated policy in international transportation.

Which provided the necessary capital : Which provided the necessary capital. Within the eastern reaches of what became the German Confederation. Britain and western Europe.

In which imf policies or intervention affected exchange rate : Can you give us example of real world situation in which IMF's policies or interventions affected exchange rates and, consequently, a multinational corporation?

Which means that simones supply of labor over wage range is : Simone is nurse living in San Francisco who performs freelance health consulting to supplement. Which means that Simone's supply of labor over wage range is.

Calculate the effect of the change in government spending : Calculate the effect of the change in the government spending on the equilibrium interest rate, exchange rate and output level.

What are the key differentiating characteristics of a market : What are the key differentiating characteristics of a market characterized by oligopoly versus monopolistic competition? Provide one specific example of each.

Show the effect of the recession on equilibrium price : Assume the economy moves into a recession and the demand for Acme's product falls. Show the effect of the recession on equilibrium price, output, and profits.

Do you see any significant trends : Graph the main expenditure components of GDP, in real terms, since the first quarter of 1947. Do you see any significant trends?

Elements of an organizational ethics program : What are the essential elements of an organizational ethics program? Be specific! How would you implement in your current or future organization?

User Account

All Pages