Assume the following model of the economy, with the price level fixed at 1.0: C=0.8(Y-T) T...

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Assume the following model of the economy, with the price level fixed at 1.0: C=0.8(Y-T) T = 1,000 I=800-20r G = 1,000 (M/P)d=0.4Y-40r Money Supply = 1,200 a. Write a formula for the IS curve, showing Y as a function of r alone. b. Write a formula for the LM curve, showing Y as a function of r alone. c. What are the short-run equilibrium values of Y, real interest rate, disposable consumption, and investment? (3 marks) (3 marks) income, (10 marks) d Assume that government expenditure increases by 200. By how much will output increase in short-run equilibrium (hint: find the new r)? What is the government-purchases multiplier? (10 marks) e. If money supply increases and price level is constant, what would happen to IS curve and LM curve? Explain your answer. (3 marks) Assume the following model of the economy, with the price level fixed at 1.0: C=0.8(Y-T) T = 1,000 I=800-20r G = 1,000 (M/P)d=0.4Y-40r Money Supply = 1,200 a. Write a formula for the IS curve, showing Y as a function of r alone. b. Write a formula for the LM curve, showing Y as a function of r alone. c. What are the short-run equilibrium values of Y, real interest rate, disposable consumption, and investment? (3 marks) (3 marks) income, (10 marks) d Assume that government expenditure increases by 200. By how much will output increase in short-run equilibrium (hint: find the new r)? What is the government-purchases multiplier? (10 marks) e. If money supply increases and price level is constant, what would happen to IS curve and LM curve? Explain your answer. (3 marks)

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This question pertains to a simplified macroeconomic model representing the economy using the ISLM framework Since I cannot see any images Ill answer the question by providing an explanation based on ... View the full answer