Unformatted text preview: where every variable in the right hand side is exogenous variable. The comparative statistic results will be as ∆r = (1/d)∆a ∆r = (1/d)∆c ∆r = (1/d)∆G ∆r = (-b/d)∆T Based on these, you should be able to answer problems 8 and 10 verbally, mathematically and graphically. Another way to see this is to take total differentiation of Y – a – b(Y – T) – G = c-dr And obtain ∆Y - ∆a – b(∆Y - ∆T) - ∆G = ∆c - r∆d - d∆r To find the effect of a change in T, i.e., ∆T > 0, we set ∆Y = 0, ∆a = 0, ∆G = 0, ∆c = 0, and have b(∆T) = - d∆r → ∆r = (-b/d)∆T. Apply the same approach, we can obtain ∆r = (1/d)∆a; ∆r = (1/d)∆c; ∆r = (1/d)∆G...
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- Economics, new equilibrium, comparative static analysis, new equilibrium position, previous equilibrium position