ECON202assignment4

# ECON202assignment4 - ECON 202 SPRING 2009 Assignment#4...

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ECON 202, SPRING 2009 Malhar Nabar Assignment #4 Assigned: April 10 Due: In class, Tuesday, April 21 Note your own individual answer sheet with the names of all group members listed on the front page. 1. ( OLD MID-TERM QUESTION ) IS-LM model An economy is described by the following equations: Consumption: C = 50 + 0 : 5( Y T ) Investment: I = 200 500 r Government expenditure: G = 100 Tax revenue: T = 100 Demand for Real Money Balances: L ( r; Y ) = 0 : 5 Y 1000 r Supply of Real Money Balances: M P = 150 Potential output: Y = 500 a. (Twelve points) Please write down the equations for the IS and LM curves (i.e. the expressions for the relationship between r and Y that describe, respectively, the goods and money market equilibria). b. (Twelve points) Suppose that the economy is in an equilibrium consistent with full employ- ment. Calculate the equilibrium values of output, the real interest rate, and consumption.

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## This note was uploaded on 06/15/2010 for the course ECON 202 taught by Professor Nabar during the Spring '08 term at Wellesley College.

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ECON202assignment4 - ECON 202 SPRING 2009 Assignment#4...

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