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BEcon 301
Practice Exercises for Chapter 5 – Answer key
1.
decrease; decrease;
2.
increase; decrease;
3.
increase; can’t tell exactly;
4.
increase; increase;
5.
decrease; decrease;
6.
false;
7.
true;
8.
i
IS
When the Fed sells government bonds it decreases
the money supply.
LM’
LM curve will shift up.
LM
The IS curve will not be impacted.
Y
9. a) IS relation: Y = 78 – 200i
LM relation: i = Y/400 – 0.16
Y = 73.3 and i = 2.3%
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Unformatted text preview: b) The results will depend on your assumptions. For guide look at the notes form Chapter 5 handed out on 04/22/09. 10. a) IS relation: Y = 84.9 – 188.6i LM relation: i = Y/400 – 0.16 or i = 0.0025Y – 0.16 Y = 78.6 and i = 0.0365 or 3.65% b) The results will depend on your assumptions. For guide look at the notes form Chapter 5 handed out in class....
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This note was uploaded on 12/22/2011 for the course MACROECON 301 taught by Professor Christinanagy during the Fall '09 term at University of Washington.
 Fall '09
 ChristinaNagy

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