ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
expand_more
expand_more
format_list_bulleted
Related questions
Question
Title
If someone could show me how to solve this IS-LM problem that would be very helpful. Thanks! Show tr
Description
If someone could show me how to solve this IS-LM problem that would be very helpful. Thanks!
Show transcribed image text Desired consumption:
C^d = 580 + [0.55 x (Y - T)] - 45r
Desired investment: I^d = 430 - 40r
Real money demand: L = 0.6 Y - 95i
Full-employment output: Y = 2,210
Expected inflation pi^c : 0.03
In this economy the government always has a balanced budget, so T = G, where T is total taxes collected.
a. Suppose that T = G = 150 and that M = 4,320. Use the classical IS-LM model to determine the equilibrium value of the real interest rate. (flint: In the classical model output always equals its full-employment level.)
The equations are: The initial equilibrium values of output, real interest rate, consumption, investment and the price level were found to be: Output = 2,210 Real interest rate = 0.97 Consumption = 1,669.4 Investment = 391.2 Price level = 3.51 b. Suppose that the money supply changes to M = 4,480. Use the classical IS-LM model to find the general-equilibrium values of the real rate of interest, consumption, investment, and the price level. Real rate of interest, r = Consumption = Investment = Price, P =
![Desired consumption: Cd = 580 + [0.55 x (Y– T)]– 45r
1d = 430 – 40r
Desired investment:
Real money demand:
Full-employment output: Y = 2,210
Expected inflation:
L= 0.6Y-95i
T° = 0.03
In this economy the government always has a balanced budget, so T = G, where Tis total taxes collected.
a. Suppose that T = G=150 and that M= 4,320. Use the classical IS-LM model to determine the equilibrium value of the real interest rate. (Hint: In the classical model output always equals
its full-employment level.) The equations are:
IS: Y=2,394 – 189r
LM: Y = 5 + 7,200
+ 158r
The initial equilibrium values of output, real interest rate, consumption, investment and the price level were found to be:
Output = 2,210
Real interest rate = 0.97
Consumption = 1,669.4
Investment = 391.2
Price level = 3.51
b. Suppose that the money supply changes to M= 4,480. Use the classical IS-LM model to find the general-equilibrium values of the real rate of interest, consumption, investment, and the
price level.
Real rate of interest, r=(Enter your response rounded to two decimal places.)
Consumption
(Enter your response rounded to one decimal place.)
Investment =. (Enter your response rounded to one decimal place.)
Price, P =
(Enter your response rounded to two decimal places.)](https://content.bartleby.com/qna-images/question/e2b65e52-3662-4eb9-8f7d-26958771655d/1b5217fc-8daf-4f7a-a90a-a8685b4947c5/d6mjhnk_processed.png)
Transcribed Image Text:Desired consumption: Cd = 580 + [0.55 x (Y– T)]– 45r
1d = 430 – 40r
Desired investment:
Real money demand:
Full-employment output: Y = 2,210
Expected inflation:
L= 0.6Y-95i
T° = 0.03
In this economy the government always has a balanced budget, so T = G, where Tis total taxes collected.
a. Suppose that T = G=150 and that M= 4,320. Use the classical IS-LM model to determine the equilibrium value of the real interest rate. (Hint: In the classical model output always equals
its full-employment level.) The equations are:
IS: Y=2,394 – 189r
LM: Y = 5 + 7,200
+ 158r
The initial equilibrium values of output, real interest rate, consumption, investment and the price level were found to be:
Output = 2,210
Real interest rate = 0.97
Consumption = 1,669.4
Investment = 391.2
Price level = 3.51
b. Suppose that the money supply changes to M= 4,480. Use the classical IS-LM model to find the general-equilibrium values of the real rate of interest, consumption, investment, and the
price level.
Real rate of interest, r=(Enter your response rounded to two decimal places.)
Consumption
(Enter your response rounded to one decimal place.)
Investment =. (Enter your response rounded to one decimal place.)
Price, P =
(Enter your response rounded to two decimal places.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution
Trending nowThis is a popular solution!
Step by stepSolved in 4 steps with 11 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Sub : EconomicsPls answer very fast.I ll upvote correct answer. Thank You Jackson Corporation has accumulated minimum tax credits of $475,000 from tax years prior to 2019. Required: If 2019 regular tax before credits is $210,000 and Jackson qualifies for general business credits of $13,000, calculate its allowable minimum tax credit for 2019.arrow_forwardChemistryarrow_forwardgle Chrome /evo/index.html?deploymentld%3D56736719115714608139104112999&elSBN=9781337096607&snapshotld=1586258&id%3709153660& Q Search this course * CENGAGE MINDTAP Homework (Ch 11) 5. Interest, inflation, and purchasing power Suppose Alyssa is a cinephile and buys only movie tickets. Alyssa deposits $2,000 in a bank account that pays an annual nominal interest rate of 15%. Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a movie ticket is priced at $20.00. 100 movie tickets. Initially, the purchasing power of Alyssa's $2,000 deposit is For each of the annual inflation rates given in the following table, first determine the new price of a movie ticket, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Alyssa's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your…arrow_forward
- https://www.bartleby.com/questions-and-answers/c-what-is-the-cost-of-the-consumers-original-2018-bundle-at-the-new-2019-prices-how-much-additional-/675abf18-19f1-4670-9231-9fd87bd18bbd I need help with part f & garrow_forward(a) ASP100) P Q 125 100 75 (D) AS(P125) $560 500 440 P Q P (C) AS(PS) 125 $500 120 100 440 100 75 300 75 500 Suppose the full employment level of real output (Q) for a hypothetical economy is $500, the price level (P) initially is 100, and prices and wages are flexible both upward and downward. Refer to the accompanying short-run aggregate supply schedules. In the long run, an increase in the price level from 100 to 125 will O increase real output from $500 to $560 O $620 O change the aggregate supply schedule from (a) to (c) and result in an equilibrium level of real output of $560 O decrease real output from $500 to $440 O change the aggregate supply schedule from (a) to (b) and result in an equilibrium level of real output of $500arrow_forwardQ9. The profit levels of a company for varying levels of sales is shown in the table below: (All values in £1000) Sales 300 290 280 255 260 Profit 50 60 25 -10 10 A prospective investor is interested in seeing how the rate of profit is related to Sales and so produces the incomplete table below: Sales 300 290 280 255 260 profit rate Which is the row with the correct values of the profit rate? А. profit rate 22.7% 16.7% 12.4% -6.9% 4.44% В. profit rate 16.7% 20.7% 8.9% -3.9% 3.85% profit rate profit rate С. 18.2% 16.3% 4.6% -4.5% 5.58% D. 9.1% 36.3% 5.8% -0.5% 3.44% Ο Α. Α В. В С. С O D. Darrow_forward
- Essentials Final x + s/Microeconomic%20Essentials%20Final%200SA.pdf W 8 / 18 90% + QUESTION 12 Consider the following scenario: Q (4 Marks) Steven owns his own auto repair shop. He uses his own premises as a workshop. If he had rented his premises to someone else, he would have received R18 000 in rent. He initially invested R50 000 in his business to buy tools and machines. If he had invested the money, he could have earned 10% per year on the money, which is R5 000 per year. If he did not work for himself, he could have earned a salary of R60 000. His expenditure for the year consisted of the following: Oil, petrol, sparkplugs, fan belts and other materials: R70 000 Salary for two junior mechanics: R35 000 Admin costs: R15 000 Assume that the total revenue of the auto shop is R230 000. Calculate Steve's economic profit. a) R203 000 b) R110 000 c) R27 000 d) R32 000 DOLL 11 ENG 2024/0arrow_forwardPLS HELP ASAP ON BOTHarrow_forwardf Question 2: Show the effect of the following transactions of May 2021 on the accounting equation: 2 6 11 The owner, Ms. Rose Petals, contributed R80 000 as capital contribution. Issued receipt no. 57. According to the cash register roll, the business received R5 300 for services rendered. Cashed a cheque (Cheque 03) to pay the wages of her 2 workers. They each earn R1000 per week. 30 Paid Mogale City for the water and electricity, R2 000 per cheque. Day Assets Owner's Equity + Liabilities Effect Reason Effect Reason Effect Reason (14)arrow_forward
- pls solve this ques in 10-15 minutes I'll give you multiple upvotes.arrow_forwardShow graphically how an increase in household confidence about future income affects the loanable funds market. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardil YouTube CENGAGE MINDTAP PRICE LEVEL Aplia Homework: Fiscal Policy Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.7. The following graph shows the aggregate demand curves (AD₁ and AD2), the short-run aggregate supply curve (SRAS), and the long-run aggregate supply curve (LRAS). The economy is currently at point A. MAR 7 140 136 Maps Translate 132 128 124 120 116 112 108 350 450 LRAS AD₁ SRAS 124 Aa O AD2 550 650 750 850 REAL GDP (Billions of dollars) 950 1050 1150 115 13 (?) 11,094 15 4 zoom W 19801&18=1995638042&snapshotid.... te 2 .arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education