ISLM Practice Problem Part 1 - Deriving the IS and LM Curves, and the IS-LM Diagram
This problem deals with the IS LM model - Given equation descriptions of consumption, investment and money demand - and given values for government purchases, taxes, the money supply, we calculate the IS Curve, we build the LM Curve, and we find equilibrium output (or income, or Y*) and the equilibrium interest rate (r*).
More Macroeconomics Problems: sites.google.com/site/curtiskephart/ta/intermediate-macro-solutions
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Consider the economy of Hicksonia.
2:30 a. The consumption function is given by:
C=200+0.75(Y-T)
The investment function is:
I=200-25r
Government purchases and taxes are both 100. For this economy, graph the IS curve for r changing from 0 to 8
5:30 b. The money demand function in Hicksonia is
(M/P)^d=Y-100r
The nominal money supply is 1000 and the price level P is 2. For this economy, graph the LM curve for r ranging from 0 to 8
9:00 c. Find the equilibrium interest rate r and equilibrium level of income Y.
kzread.info/dash/bejne/qKxq2ZeDdqzQqto.html d. Suppose that government purchases are raised from 100 to 150. How does the IS curve shift? What are the new equilibrium interest rate and level of income?
kzread.info/dash/bejne/lGZsztWIham1pNo.html e. Suppose instead that the money supply is raised from 1000 to 1200. How does the LM curve shift? What are the new equilibrium interest rate and level of income?
kzread.info/dash/bejne/q3Z20qdxgN3Ve7g.html f. With the initial values for monetary and fiscal policy, suppose that the price level rises from 2 to 4. What happens? What are the new equilibrium interest rate and level of income?
kzread.info/dash/bejne/Z3mE2NmaoqbXdKQ.html g. Derive and graph an equation for the aggregate demand curve. What happens to this aggregate demand curve if fiscal or monetary policy changes, as in part (a) and (e)?
from Mankiw's Macroeconomics (8th ed) - Aggregate Demand Part 2 (Chapter 12) - Problem 3
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Пікірлер: 36
currently doing online classes in university and found your video very helpful!!! thank u!
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Hi,nice tutorial,suggestion make a tutorial on how to solve financial market like how to solve demand for currency,demand for checkable deposit,demand for reserves ,supply of money and etc. Thank you
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Dear Sir I have a question which I’ll be thankful if you can help me : In total demand of Keynes equation which is equal to L+ky+hr, how can we calculate interest sensitivity of demand for real money of H and independent demand money of L for Japan economy ? Is there any website that I can find all IS-LM equation's factors. Because for example for Japan economy , I do have m1 , m2, GDP and p but in order to solve the IS-LM equation, I still need to have total interest sensitivity of demand for real money of H and independent demand money of L . Thank you so much in advance for you kind help and support.
That's a wonderful video, but I don't quit understand how you solved the IS. (200+0.75(Y-100) + 200-25r +100) to give you Y=0.75+425-25? Please explain more of that to me, thanks.
awesome
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According to your IS curve when interest rate is 17 the economy output is zero. Are any of this numbers or functions realistic? Why didn't you draw that part of the graph?
how did you solve for y??? i was thrown off by the (1 - 0.75) when you solved
@amarch8
10 жыл бұрын
I'm sure it's late now, but he subtracted the 0.75y from the y on the left side of the equation and factored out the y.
beh mahal na mahal na kita beh
C=30+0.75Yd-0.Ir I= 30+0.1Y-5r G=40 T=-10+0.2Y L= 0.25Y-0.5r +30 M= 60. Question derive the questions for the IS and LM schedules with comment? 2. Solve for the Equilibrium values of Y and R. Please help out, Thank you.
This is all in MS Word 2007 (with equation editor), and a free screen capture software from download.com. Pretty simple stuff.
@yuzarsifsalim7896
6 жыл бұрын
economicurtis your email address please. kindly I need your assistance in deriving surch functions
@mserhatguven9463
4 жыл бұрын
@@yuzarsifsalim7896 where is the part 2
economicurtis, at 2:55 you show the consumption function: C = 200 + 0.75(Y -T) and you say that 0.75 is the marginal propensity to consume. That's nonsense. The marginal propensity to consume is: mpc = ΔC/ΔYd [where Yd = Y -T] The marginal propensity to consume doesn't fit in C = 200 + 0.75(Y -T) : C = 200 + (ΔC/ΔYd) (Y -T) C = 200 + (ΔC/ΔYd) Yd Your consumption function can be written as: C = Co + "mpc"(Yd) where Co is so-called "autonomous" consumption. C = Co + "mpc"(Yd) C - Co = "mpc"(Yd) (C - Co)/Yd = "mpc" = AVERAGE propensity for NON-AUTONOMOUS consumption. ΔC/ΔYd = the real mpc Marginal propensities have deltas. Average propensities don't have deltas.