Solution To Question Set

A-PDF PageMaster Demo. Purchase from www.A-PDF.com to remove the watermark ANSWER GUIDELINES TO ECON20401 MACROECONOMICS IIA SECTION A: inquire A1: To reach the IS equation, move into (2)-(5) into (1) and solve for Y: Y=550-3000r (IS equation) To derive the LM equation, set (7) and (8) into (6): 0.6Y-1200r = 90/P this instant set, by assumption, P=1 and solve for r: r = (2) (1) 0.6 90 Y (LM equation) 1200 1200 (3) Full attach take pictorial representation, compose explanation of equations derived and well presented and explained algebra. oppugn A2: Now creep in the LM equation (3) into the IS equation (1) and solve for output: Y = 220+ 90 P (4) Now set, by assumption, P=1: Y=310 (short-run equalizer take suggest of output) (5) Now insert the short-run balance wheel level of output into every the IS or LM equations and solve for the dictate of beguile to aim its rest value: r=8 percent (6) (Note that this is alone one of several ways to calculate the short-run labyrinthine sense values of output and care rates. altogether correct answers go away receive equal marks). Full marks require graphical representation, written explanation of equations derived and well presented and explained algebra. Question A3: As equation (4) above.

2 Question A4: To calculate the long-run equilibrium level of values, insert the level of electric potential output Y* = cd into the aggregate demand curve (4) and solve for P: P* = 0.50 (long-run equilibrium level of prices) (7) To calculate the rate of chase that is consistent with this long-run equilib rium level of output and prices, substitut! e pitcher the long-run equilibrium values of output ( Y * ? 400 ) and prices ( P * ? 0.5 ) into the LM equation (3): r * ? 5 percent (8) At Y=310, the preservation operates below potential hence prices will gradually fall. As the aggregate price level falls, sincere money supply increases and the rate of interest declines shifting the economy along the AD curve. The process of adjustment...If you indispensableness to get a full essay, order it on our website: OrderCustomPaper.com

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