Essay
Suppose that the following IS-LM model represents the ATA economy.
Y = Cᵈ + Iᵈ + G
Cᵈ = 180 + 0.7 (Y - T)
Iᵈ = 100 - 18i - 0.1Y
T = 400
G = 400
M/P = L
L = 6Y - 120i
M = 5400
Assume expected inflation is zero and P = 1.
a.Find the equilibrium values for output and the interest rate.
b.Find the new equilibrium values for output and the interest rate if the central bank of ATA increases the money supply to 5600.
c.What are the effects of the monetary expansion above on consumption and investment?
Correct Answer:
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a.Y = 110,i = 10
b.Y = 1127.3,...View Answer
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Correct Answer:
Verified
b.Y = 1127.3,...
View Answer
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