ans5154a

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

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

View Full Document Right Arrow Icon
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. Desiredsavingis 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. LM
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This homework help was uploaded on 04/06/2008 for the course ECON 154 taught by Professor Bjoernbruegemann during the Spring '07 term at Yale.

Page1 / 5

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

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online