Additional Goods Market Problems

Additional Goods Market Problems - These are some...

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These are some additional (and entirely optional) goods market problems prompted by questions from class. The first explains why the IS curve has that name while the second studies the (demand-side) effects of a cut in the tax rate. The third studies a “balanced-budget” rise in government spending. I've posted my solutions on Bb. 1. Consider the goods market portion of our model of aggregate demand. We have the following equations describing the spending behavior of the economy Gœ+,Ð]XÑ XœX >] E MœMÐ<Ñ KœK Recall that (desired national) saving is and show that the goods market Wœ]GK equilibrium condition, implies that there is a negative relationship between the WœM Ð< ß]Ñ pairs that clear the goods market. Show further that this approach gives the same equation for the IS curve as we found in class. 2. Recall our expression for the IS curve when , viz., . MÐ<Ñ œ D .< ] œ +,X D.<K ",Ð">Ñ E
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This note was uploaded on 04/26/2010 for the course ECON 101 taught by Professor Staff during the Spring '08 term at Vassar.

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