1.Consider the Economy of Rwanda. The consumption function is given by ?=200+0.75[?−?] while the investment function is ?=200−25?. Government purchases and taxes are both 100. The money demand function of Rwanda is [??⁄]?=?−100?. The nominal money supply is 100 and the price level P is 2. i i) Derive the IS curve equation. ii ii) Draw a well labeled diagram of the IS Curve. iii iii) Derive the LM curve equation. iv iv) Draw a well labeled diagram of the LM Curve. v v) Determine the equilibrium level of income and equilibrium interest rate 2.Keynes developed the concept of the multiplier with the intention of arguing that extra government spending on public works which is financed by a budget deficit would have a positive effect on a demand deficient economy. However, several factors limit the application of the multiplier for an economic management. Discuss 3.Trade war happens when one country retaliates against another by using import tariffs or placing other restriction on the other country’s imports. This can commence if one country perceives a competitor nation has unfair trading practices. Explain the policy implications of trade dispute in an economy.
1.Consider the Economy of Rwanda. The consumption function is given by ?=200+0.75[?−?] while the
investment function is ?=200−25?. Government purchases and taxes are both 100.
The money demand function of Rwanda is [??⁄]?=?−100?. The nominal money supply is 100 and the
price level P is 2.
i i) Derive the IS curve equation.
ii ii) Draw a well labeled diagram of the IS Curve.
iii iii) Derive the LM curve equation.
iv iv) Draw a well labeled diagram of the LM Curve.
v v) Determine the equilibrium level of income and equilibrium interest rate
2.Keynes developed the concept of the multiplier with the intention of arguing that extra government
spending on public works which is financed by a budget deficit would have a positive effect on a demand
deficient economy. However, several factors limit the application of the multiplier for an economic
management. Discuss
3.Trade war happens when one country retaliates against another by using import tariffs or placing other
restriction on the other country’s imports. This can commence if one country perceives a competitor
nation has unfair trading practices. Explain the policy implications of trade dispute in an economy.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
