the IS-LM model is considered. Autonomous consumption equals 100, autonomous investment equals 100, government spending equals 100, marginal propensity to consume equals 0.9, income tax rate equals 0.1, investment sensitivity parameter equals 10, autonomous speculative demand equals 200, speculative demand sensitivity parameter equals 4, transactions demand sensitivity parameter equals 1, precautionary demand equals 200, nominal money supply equals 500, and general level of prices equals 2   a) find IS curve and interpret its slope   b) derive IS curve graphically   c) find LM curve and interpret its slope   d) derive LM curve graphically   e) find equilibrium income and equilibrium interest rate   f) present IS-LM model graphically and show how fiscal contraction affects economy

Consider the following short-run, closed economy model of the economy. Goods Market C = 50 + 0.5(Y – T) I = 150 – 10r ; NX = -200 G = 150 ; T = 100   Money Market M = 20,000 P = 100 L(Y, r) = Y – 50r   1. Find the equilibrium values of r and y. *** This has been answered*** Goods Market = 600 - 20r Money Market = 200 + 50r equilibrium value of r = 5.71; Y = 485.8   2. At the equilibrium in part 1, what is the value of national savings (S = Y – C – G)? Investment? Show the results using a graph for the market of loanable funds. Is that market in equilibrium? Explain.

Consider the two-period Real Business Cycle (RBC) model without uncertainty presented in the lecture slides, but with one modification. Now assume that the instantaneous utility function for households takes the form:   where Ct is consumption at time t and (1- lt) is leisure time at time t. Given that the time endowment is normalized to 1, it follows that lt is hours worked at time t. Finally, Ɵ > 0, b > 0 and gamma > 0 are parameters. All households in the economy are assumed to be identical. We can therefore consider a 'representative household' (henceforth 'the household'). Set t = 1 for the present period and set t = 2 for the next period. For example, C1 is consumption in the present period and C2 is consumption in the next period. Remember, this is a two-period model so there are no time periods prior to t = 1 and there are no time periods after t = 2 Assume that the household begins and ends life with no accumulated wealth and that the real interest rate is r (where…

Note:hand written solution should be avoided.