Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Chapter 9, Problem 1AP
To determine
To Evaluate: Effects on different economic variable under different condition using IS-LM model.
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Students have asked these similar questions
Assume that at a Monetary Policy Committee meeting the South African Reserve Bank decides to increase the repo rate.
what is the impact of a higher repo rate be on real production (Y) and prices
answer c and d
Suppose that the following system of equations describe the macroeconomy of a
hypothetical country:
Y= C(y)+I(i)+G : IS or goods market
M/p=L(i,y) : LM or money market
b) Taking money supply and government expenditure as exogenous and the price
level as fixed, determine and provide economic intuition for the signs and
magnitudes of the following multipliers
dY/dG and
di/dG
c) For a simultaneous increase in both the interest elasticity of investment and
interest elasticity demand for money parameters, determine the net effect on the
values of the multipliers in part b).
d) For a horizontal LM curve, determine the numerical values of your answers in
part b) above if:
Marginal propensity to consume=5/6
Tax rate=0.25
Interest elasticity of investment=5
Interest elasticity of demand for money=50
Income elasticity of demand for money=2
answer c and d only
Which one of the following statements is true?
In the pre-Keynesian era, prices were assumed not to fully adjust.
In the Keynesian model diagram, prices are fixed.
GDP is a value of goods and services domestically produced in a country at a given point in time.
Say's Law says that demand creates its own production.
In the IS/LM model, the interest rate is a function of investment.
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