Consider the following IS–LM model: C = 100 + .25YD I = 50 + .25Y - 1000i G = 150 T = 100 (M/P) d = 2Y - 8000i (M/P)s = 1000 a. Derive the IS relation b. Derive the LM relation c. Solve for equilibrium real output. d. Solve for the equilibrium interest rate e. Solve for the equilibrium values of C and I f. now suppose that the money supply increases to M/P = 1010. Solve for T, f. suppose that government spending increases to G = 155 What is the value of money supply? g. From what we studied, which policy, expansionary fiscal policy or expansionary monetary policy will undoubtedly increase investment.
Consider the following IS–LM model: C = 100 + .25YD I = 50 + .25Y - 1000i G = 150 T = 100 (M/P) d = 2Y - 8000i (M/P)s = 1000 a. Derive the IS relation b. Derive the LM relation c. Solve for equilibrium real output. d. Solve for the equilibrium interest rate e. Solve for the equilibrium values of C and I f. now suppose that the money supply increases to M/P = 1010. Solve for T, f. suppose that government spending increases to G = 155 What is the value of money supply? g. From what we studied, which policy, expansionary fiscal policy or expansionary monetary policy will undoubtedly increase investment.
Chapter9: Aggregate Expenditures
Section: Chapter Questions
Problem 5E
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Question
Consider the following IS–LM model:
C = 100 + .25YD
I = 50 + .25Y - 1000i
G = 150
T = 100
(M/P) d = 2Y - 8000i
(M/P)s = 1000
a. Derive the IS relation
b. Derive the LM relation
c. Solve for equilibrium real output.
d. Solve for the equilibrium interest rate
e. Solve for the equilibrium values of C and I
f. now suppose that the money supply increases to M/P =
1010. Solve for T,
f. suppose that government spending increases to G = 155 What is the value of money supply?
g. From what we studied, which policy, expansionary fiscal policy or expansionary
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