ECON2123+PS2-fa13

2 marks d solve for the equilibrium interest rate

Info iconThis preview shows page 1. Sign up to view the full content.

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

Unformatted text preview: Solve for the equilibrium interest rate. (Hint: Substitute the value you obtained for Y in part (c) into either the IS or LM equations and solve for i. If your algebra is correct, you should g et the same answer from both equations.) (2 marks) (e) Solve for equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G. (2 marks) 3 ECON 2123: Macroeconomics (f) Problem Set 2 Instructor: Yao Li Graph IS-LM diagram of above with correct labels. (Hint: You need to correctly label the x and y axis, and denote the value of the equilibrium Y and i.) (1 mark) (g) Now consider monetary expansion. Suppose money supply increases to (M/P)s = 1840. Solve for equilibrium Y, i, C and I, and describe in words the effects of an expansionary monetary poli cy on Y, i, C and I. (3 marks) (h) Set M/P...
View Full Document

Ask a homework question - tutors are online