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:

Chromosomes Line Up

A phase in cell division where chromosomes align in the middle of the cell before being separated into daughter cells.

Mitosis

A process of cell division in eukaryotic cells that results in two genetically identical daughter cells from a single parent cell.

Plasma Membrane

The lipid bilayer that surrounds a cell, controlling the movement of substances in and out of the cell.

Storing Energy

The process of retaining energy produced in one form for future use, such as through chemical bonds, batteries, or other mediums.