401ps4answers-10 - ECON 401A Autumn 2010 ANSWERS FOR...

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ECON 401A Hartman Autumn 2010 ANSWERS FOR PROBLEM SET IV 1.a. The IS relationship is 1 28 0 4 Yr  ; the LM relationship is 3400 24 P  . 1.b. The AD relationship is 1360 64 Y P  1.c. 200 Y 1.d. 15% r , 10 P , 130 C , 30 I , and 10 W 1.e. 8 P , 10.75% r , 155.5 C , 38.5 I , and 234 Y 2.a. Since CIGY   , substitute to get 10 0.8( ) 800 YT ZGY  , which, since 2 Z Y    , implies that 10 0.8( ) 800 2 YGY  or that 0.1 405 0.4 0.5 YY T G  . The model is stable
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