Ch5.6 Numerial Example of Monetary Expansion

# Ch5.6 Numerial Example of Monetary Expansion - NEW...

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More questions for the Numerical Example of Expansionary Monetary Policy A. Goods Market Production=Demand: Y=C =200+0.25(Y-200)+150+0.25Y-1000i+250 [Note: C=200+0.25(Y-T); I=150+0.25Y-1000i; G=250; T=200] Find the IS relation. Y=1100-2000i B. Financial Markets Real money supply=real money demand: M/P=1600=2Y-8000i Find the LM relation. i=-0.2+0.00025Y C. What are the equilibrium values of interest rate and output? Y=1000; i=0.05 D. Now suppose the real money supply (M/P) increases to 1840. What are the new equilibrium values of interest rate and output? Y’=1040; i’=0.03
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Unformatted text preview: NEW QUESTIONS (Try it!) a) Use the information above (from Q.A-Q.C) to write the national saving function. b) Using the information above (from Q.A-Q.C) and the answers in (a), graphically illustrate the national saving function and investment function. Indicate the intercepts, the slopes, the equilibrium Y and the equilibrium level of investment. c) Suppose that government spending increases. What are the effects on i, Y and I? Demonstrate the effects on the equilibrium level of investment with the national saving-Investment diagram obtained from (b)....
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## This note was uploaded on 02/19/2011 for the course ECON 1021 taught by Professor Kokwanwai during the Fall '08 term at CUHK.

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