Econ. 102.
Homework 10.
Due: Monday, May 17, 2010.
*******.
1.
Show your derivation and calculation explicitly.
2.
Use the
ruler
to draw graphs. (Also show the
scale
explicitly).
3.
Email submission of your answer will not be accepted.
4.
Do not copy someone else’s answer.
******.
It is wellknown that only two of
twelve postwar recessions were caused by
a negative supply shock
(1973 ArabIsraeli war and 1979 Iranian revolution).
Most of recessions are mainly caused by
demand
shocks
.
Keynesian Cross models will help us understand how demand side of an economy works.
*****.
1. Consider the following model of the economy (in billions of $)
(1) Y = C + I + G
(2) C = a + b(Y T) = 200 + 0.75(Y – T),
1 > b > 0.
(3) I = 100
(4) G = 100
(5) T = 100
where a, b, I, G, T are exogenous variables and Y is the only endogenous variable.
a.
Under what assumptions we can use these equations to describe an economy? [2]
Equilibrium Analysis
b.
Derive the planned expenditure equation, E = C + I + G. [3]
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 '10
 Shieh,YeungNan
 Economics, Macroeconomics, Keynesian economics, Eugene Fama, 100 g, stimulus plans

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