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Unformatted text preview: b. (.25 points) Derivation of the LM curve: 1 3. What are the equilibrium levels of the interest rate and aggregate output for this economy? Show your work. a. (.25 points) The equilibrium interest rate = __________________ b. (.25 points) The equilibrium level of aggregate output = ____________ 4. (.5 points) On the graphs below, draw the investment demand curve, the Keynesian cross diagram and your IS curve that you derived in question (1). Label all possible intercepts in your graphs as well as all axes. Label final values you found in solving this ISLM model. 2 5. (.5 points) On the graphs below, draw the market for real money balances and the LM curve you derived in question (2). Label all possible intercepts in your graphs as well as all axes. Label final values you found in solving this ISLM model. 3...
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 Spring '07
 GOLD
 Economics, Macroeconomics, Liquidity preference, IS/LM model, John Hicks, real money balances

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