Suppose That the Following IS-LM Model Represents the ATA Economy

question 95

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?

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Definitions:

Sensory Memory

is a very short-term storage of information received through the senses, which lasts for a very brief period but is crucial for perceiving the environment.

Research Participants

Individuals or groups who take part in scientific studies to provide data.

Mnemonic Device

A method or technique used to aid memory, often by making information easier to remember through patterns, letters, or associations.

Memory Aid

A tool or strategy used to improve recall of information.