ans5154a

# ans5154a - Econ 154b Spring 2005 Suggested Solutions to...

This preview shows pages 1–2. Sign up to view the full content.

Econ 154b Spring 2005 Suggested Solutions to Problem Set 5 Question 1 For the period analyzed, of all quarterly changes in the civilian unemployment rate by at least 0.2 percentage points, about 80 were followed by changes of similar magnitude in the same direction; about 30 were followed by changes of similar magnitude in the opposite direction; and about 20 were followed by no changes of similar magnitude. We conclude that the unemployment rate is a persistent variable. Question 2 The IS curve is found by setting desired saving equal to desired investment. Desired saving is S d Y C d G Y 1275 0.5 Y T 200 r G . Setting S d I d gives Y 1275 0.5 Y T 200 r G 900 200 r , or Y 4350 800 r 2 G T . The LM curve is M / P L 0.5 Y 200 i 0.5 Y 200 r 0.5 Y 200 r . (a) For this question, T G 450, M 9000. The IS curve gives Y 4350 800 r 2 G T 4350 800 r 2 450 450 4800 800 r . The LM curve gives 9000/ P 0.5 Y 200 r . To find the aggregate demand curve, eliminate r in the two equations by multiplying the LM curve through by 4 and rearrange the resulting equation and the IS curve.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern