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# set8154a - Econ 154b Yale University Spring 2005 Prof Tony...

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Unformatted text preview: Econ 154b Yale University Spring 2005 Prof. Tony Smith HOMEWORK #8 This homework assignment is due at the beginning of lecture on Monday, April 11. 1. Do numerical problem #4 on p. 425 in Chapter 11 of the textbook. In addition, do part (d) below: (d) Suppose that the economy is the long-run equilibrium in part (c) and G increases from 100 to 110 ( T remains fixed at 100). Determine the new short-run equilib- rium values of Y , r , C , and I ( P remains fixed at its initial value). Calculate the multiplier on government spending (i.e., the change in Y divided by the change in G ). In addition, graph the I d , S d , IS , and AD curves and show how they shift when G increases from 100 to 110. (e) Optional bonus question: How do your answers in part (d) change if T increases at the same time as G so as to keep the government’s budget balanced? 2. Do analytical problem #5 on p. 466 in Chapter 12 of the textbook. 3. This problem studies the dynamic behavior of a macroeconomic model that consists of three equations: Okun’s law, an aggregate demand curve, and a Phillips curve. Write Okun’s law as follows: u t- u t- 1 =- . 5( g yt...
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set8154a - Econ 154b Yale University Spring 2005 Prof Tony...

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