• Comparing the new (@Y/G₁), what can you conclude about the effectivity of fiscal policy in the new model where money demand is independent of i? ● Comparing the new (ƏY/M), what can you conclude about the effectivity of monetary policy in the new model where money demand is independent of i?
• Comparing the new (@Y/G₁), what can you conclude about the effectivity of fiscal policy in the new model where money demand is independent of i? ● Comparing the new (ƏY/M), what can you conclude about the effectivity of monetary policy in the new model where money demand is independent of i?
Chapter7: Macroeconomic Measurements, Part Ii: Gdp And Real Gdp
Section: Chapter Questions
Problem 7QP
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Question
Transcribed Image Text:Consider the national income model below
0 <
ac
ΟΥ
Y – C(Y) – I (i) - Go = 0
kY+L(i) - MS0 0
< 1;
al
di
ƏL
0; < 0; k = positive constant
di
Suppose that while demand for money still depends on Y as specified, it is now no longer affected
by the interest rate.
• Comparing the new (@Y/2Go), what can you conclude about the effectivity of fiscal policy in the
new model where money demand is independent of i?
• Comparing the new (@Y/OM), what can you conclude about the effectivity of monetary policy
in the new model where money demand is independent of i?
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