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Unformatted text preview: (c) Explain carefully what is exogenous variable? [2] (d) List all exogenous variables in this model. [2] Equilibrium Analysis (e) Find equilibrium value of general price (p*) and RGDP (Y*). [2] (f) Show the model and the solution graphically. [5] (g) Assume that the potential GDP (Y f ) = 100. Plot this LRAS curve to your graph in (f). Is this economy facing a recessionary or inflationary gap? Explain your answer. [2] Comparative Static Analysis (h) Explain carefully what is comparative static analysis? [3] (i) Use the economic model we can show how changes in exogenous variables affect the endogenous variables. For fiscal stimulus, the government increases spending, and rises AD from 135 to 165 when p = 0. Find new equilibrium value of general price (p**) and RGDP (Y**). [4] (j) Show your answer in (i) graphically. [4] (k) What is the effect of an increase in government spending on general price (p) and RGDP(Y)? [2]...
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 '10
 Shieh,YeungNan

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