IS-LM, Macroeconomics

Assignment Help:
THE PRODUCT MARKET
Z=C+I+G
C=a+bYd
I=Io+I1Y-I2i
Equilibrium condition, Y=Z, where Y represents output and Z is aggregate spending.

THE FINANCIAL MARKET
Md=MT+Mp
MT=MTo+MT1Y
Mp=Mpo-Mp1i
Ms=500
a=100, b=0.7, Io=150, I1=0.1, I2=1500, Go=150, To=90, T1=0.08,
solve for:
i)Equilibrium real output Y and interest rate, r.
ii)Determine the amount of national saving.
iii)What is equilibrium value of consumption spending C, investment spending I, speculative money demand Mp.
iv)Is the economy operating below national level of output. If yes, then reduce money supply by 50% and reduce government spending 25%.
If no, then raise money supply by 50% and government spending by 25%.
Determine the equilibrium income.
How close is this new value to the national level of output.
Represent your answer in (i) and (iv) in a graph.





Related Discussions:- IS-LM

Production possibilities, you and your neighbor (n) consume without trading...

you and your neighbor (n) consume without trading. suppose you are initially consuming 7 bananas and 3 coconuts and your neighbor is initially consuming 6 bananas and8 coconuts. Yo

Solve equilibrium price and the equilibrium quantity, Suppose that a widget...

Suppose that a widget market is described by the following supply and demand equations. Supply: Q = 3 P Demand: Q =400 - P a. Solve for the equilibrium price and the

Macroeconomic problems, Question 1: The common characteristics of LDC...

Question 1: The common characteristics of LDCs include low GDP per capita, capital scarcity, high unemployment, chronic budget deficit, high levels of external debt, hig

Indiana toll road at the rate of two per minute, Automobiles arrive at the ...

Automobiles arrive at the Elkhart exit of the Indiana Toll Road at the rate of two per minute. The distribution of arrivals approximates a Poisson distribution. A) What is the prob

What is gdp, Assuming an economy with no government and no foreign trade. M...

Assuming an economy with no government and no foreign trade. Measure GDP for the following output scenario: There are three firms: firm A is a minning company, firm B is a stee

Price level depends on current money supply and future, If the price level ...

If the price level depends on both the current money supply and future expected money supplies, in order to stop a hyperinflation, a central bank may try to establish credibility b

Majority of the citizenry pays, Can democracy survive if a majority of the ...

Can democracy survive if a majority of the citizenry pays little or nothing in taxes while benefiting directly from a higher level of government spending? Why or why not?

Protectionism and free trade, why is international trade important for sout...

why is international trade important for south Africa

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