(Appendix L2.B) Consider the economy described in Numerical Problem 3. a. What are the values of IS,...

Question:

(Appendix L2.B) Consider the economy described in Numerical Problem 3.
a. What are the values of αIS, βIS, αLM, βLM and r for this economy? (You will have to refer back to Appendix 9.B for definitions of these coefficients.)
b. Suppose that the price level is fixed at P = 15. What are the short-run equilibrium values of output and the real interest rate?
c. With the price level still fixed at P = 15, suppose that government purchases increase from G = 150 to G = 250. What are the new values of a/s and the short-run equilibrium level of output?
d. Use Eq. (12.B.5) to compute the government purchases multiplier. Use your answer to compute the short-run change in F resulting from an increase in government purchases from G = 150 to G = 250. How does your answer here compare with your answer in part (c)?