Unformatted text preview: relevant information is: a) C = 100 + 0.75 * (Y – T) b) I = 750 – 20 * r c) T = 1000; G = 1000; d) Y = C + I + G e) (M/P) d = 0.4 * Y – 48 * i f) M s = 1,200 g) (M/P) d = M s /P h) Suppose investors and bond traders expect inflation, π e = 0, so that i = r. Answer the following: (i) Calculate the IS curve. Solve for Y in terms of r. (ii) Calculate the LM curve. Again, solve for Y in terms of r. (iii) What are the short-run equilibrium values for Y, r, C, I, private saving, public saving, and national savings. (iv) Show that C + I +G = Y and that S = I (v) Present a properly labeled IS-LM graph showing the equilibrium level of Y and r. (v) Assume that G increases by 200. By how much will Y increase in the short run equilibrium? (vi) Assume that G is back at its original level of 1000, but the money supply increases by 200. By how much will Y increase in the short-run equilibrium?...
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- Spring '08
- Economics, SHORT-RUN EQUILIBRIUM, Government Purchases, Dr. Neri, short-run equilibrium values, 1,200 g