pset4 - Econ 102 Mark L.J. Wright Macroeconomic Theory

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Unformatted text preview: Econ 102 Mark L.J. Wright Macroeconomic Theory meanprofessor@hotmail.com Winter 2007 Bunche 9284 Problem Set 4: Aggregate Demand and Supply Date Due: Thursday 8th March, 2007 Problem 1 (Short Answer Questions) Evaluate each of the following statements. State whether they are true, false or uncertain, and give a short explanation of your reasoning. No points will be awarded without an explanation. 1. The aggregate demand curve is &atter, the more interest elastic investment is to interest rates. 2. In the Classical IS-LM model (in which prices are &exible and the AS curve is vertical), the greater is the marginal propensity to consume, the greater is the resulting change in prices following an increase in the nominal money supply. 3. In the Classical IS-LM model (in which prices are &exible and the AS curve is vertical), the greater is the interest sensitivity of money demand, the greater is the resulting change in prices following an increase in the nominal money supply. Problem 2 (Long Answer Question on Fiscal Policy in the IS-LM/AD- AS Model) Consider an economy that is well described by the IS-LM/AD-AS model....
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pset4 - Econ 102 Mark L.J. Wright Macroeconomic Theory

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