Essay_Method.doc - Answering Model-Based Questions Throughout this course you will be introduced to several models and you will be expected to apply

Essay_Method.doc - Answering Model-Based Questions...

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Answering Model-Based Questions Throughout this course you will be introduced to several models and you will be expected to apply these models to many situations. This is a basic guide focusing on the IS-LM model that shows how these questions should be answered. When using a graph to model anything in economics, we are interested firstly in the displayed variables (that are explicitly modelled on the axes of the graph), secondly in the variables that are exogenous to the graph (i.e. those variables that are not on the axes of the graph) and thirdly in the composition of these variables (e.g. when examining a change in output we are also interested in how C, I, G have all changed). Method For each variable that has changed: (i.e. where G has increased and T decreased you must follows steps 1 and 2 for each separately) (1) How have the curves shifted and how has equilibrium changed in terms of the values modelled on the axes? (In the case of the IS-LM you are

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