401ps1answers-10 - ECON 401A Autumn 2010 ANSWERS FOR...

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ECON 401A Hartman Autumn 2010 ANSWERS FOR PROBLEM SET I 1. 2 2 100 D P N W 2.a. 8 D H , 16 D W C P , and 16 S N 2.b. 2 2 4 D P H W , 24 4 D WP C PW  , and 2 2 24 4 S P N W 3.a. The IS equation is 19 58 5 10 10 Yr T G  The LM equation is 21 0 M P  3.b. 850 9 10 5 11 11 11 11 M YT G P  and 170 9 2 1 11 55 11 110 M rT G P 3c. If G increases and T , M , and P do not change, then 10 0 11 Y G and 2 0 11 r G  . If G and T increase by the same amount with no change in M and P, then (/ ) 0 1 0 11 dG dT dX dMP dY dX     and ) 0 1 0 55 dG dT dX dr dX . If M increases with no change in P , G , and T , then 0 0 5 0 11 dG dT dp Yd Y Md M p and 0 0 1 0 110 dG dT dp rd r M p . 4.a. * 400 N , * (/) 1 / 2 , and * 400 Y . 4.b. 10% ri and 2 P . 4.c. The equilibrium value of r increases, the equilibrium value of I decreases, and the equilibrium value of P increases. 4.d. Yes. Since neither Y nor T change, the increase in G does not change C , and therefore the IS relationship implies that
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This note was uploaded on 04/04/2011 for the course ECON 401 taught by Professor Staff during the Spring '08 term at University of Washington.

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