8) Consider the economy of Hicksonia. a. The consumption function is given by C=200+0.75(Y-T) The investment function is I= 200-25i Government purchases and taxes are both 100. For this economy, graph the IS curve for i ranging from 0 to 8. Is the Government running a surplus or a deficit (or neither)? b. The money dema File Preview n Hicksonia is =Y-100i The money supply M is 1,000 and the price level P is 2. For this economy, graph the LM curve for i ranging from 0 to 8. c. Find the equilibrium interest rate i and the equilibrium level of income Y. d. Suppose that the government purchases are raised from 100 to 150. How much does the IS curve shift? What are the new equilibrium interest rate and level of income? e. Suppose instead that the money supply is raised from 1,000 to 1,200. How much does the LM curve shift? What are the new equilibrium interest rate and level of income? f. With the initial values for monetary and fiscal policy, suppose that the price level rises from 2 to 4. What happens? What are the new equilibrium interest rate and level of income?

8) Consider the economy of Hicksonia. a. The consumption function is given by C=200+0.75(Y-T) The investment function is I= 200-25i Government purchases and taxes are both 100. For this economy, graph the IS curve for i ranging from 0 to 8. Is the Government running a surplus or a deficit (or neither)? b. The money dema File Preview n Hicksonia is =Y-100i The money supply M is 1,000 and the price level P is 2. For this economy, graph the LM curve for i ranging from 0 to 8. c. Find the equilibrium interest rate i and the equilibrium level of income Y. d. Suppose that the government purchases are raised from 100 to 150. How much does the IS curve shift? What are the new equilibrium interest rate and level of income? e. Suppose instead that the money supply is raised from 1,000 to 1,200. How much does the LM curve shift? What are the new equilibrium interest rate and level of income? f. With the initial values for monetary and fiscal policy, suppose that the price level rises from 2 to 4. What happens? What are the new equilibrium interest rate and level of income?

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter23: Six Debates Over Macroeconomic Policy

Section: Chapter Questions

Problem 6PA

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