Answer to Question #22959 in Macroeconomics for Armani

Question #22959
Consider the following C= 400+0.4Yd Yd=Y-T T=100 I=400-1000r G=100 (M/P)d=3Y-100r Ms=1000 P=1 Where C is consumption, Yd is disposable income, T is the level of lump sum taxes, I is investment, r is interest rate, G is government spending, (M/P)d is real money demand, Ms is money supply and P is the price level. (a) Calculate the IS and LM curve and find the equilibrium level of income and interest rate. What is the level of investment in equilibrium? (b) Concerned that the current level of income is too low, the government announces an expansionary fiscal policy and increases government spending by 200. Find the new equilibrium values of output and interest rates. By how much has investment been crowded out? (c) The level of income calculated in (b) is full employment level. What might be expected to happen if government does not increase spending by 200 as in (b)?
Expert's answer

Not answered

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!


No comments. Be first!

Leave a comment

Ask Your question

New on Blog