1. Suppose that the MPC=.75. If the government was to increase equilibrium output by $10,000, by how...
Question:
1. Suppose that the MPC=.75. If the government was to increase equilibrium output by $10,000, by how much should they increase government spending?
2. This question considers the link between the IS-LM model and the AD-AS model.
Suppose the Fed increases the money supply. This causes the _________ curve to shift _______, which causes aggregate demand to shift ___________. Finally, equilibrium output _________ as a result.
3.Use the IS-LM diagram to answer the following: If the Fed increases the money supply, then in the short run national income will _________, the interest rate will ___________.
4. Suppose an economy is represented by the following equations:
C=500+.75(Y-T)
I=1000 -50r
(M/P)d=Y-200r
G=1000
T=1000
M=6000
P=2
Use these equations to derive both the IS and LM curves.
Suppose that a newly elected president cuts taxes by 20%. Assuming that the money supply is held constant, what is the equilibrium interest rate in this economy? Round your answer to the nearest tenth. Do not use a percent sign when entering your answer. Your answer should not be given as a proportion (if you think the answer is that r=23% then you would input 23 rather than .23, for example).
5. Suppose an economy is represented by the following set of equations:
C=500+.75(Y-T)
I=1000 -50r
(M/P)d=Y-200r
G=1000
T=1000
M=6000
P=2
Use these equations to derive both the IS and LM curves.
Suppose that a newly elected president cuts taxes by 20%. Assuming that the money supply is held constant, what is the equilibrium output in this economy?
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba