Answer ASAP Q.1Consider the following IS-LM modelY = C(r*)+I(r)+G, Y = Y - tYC = a +bY°M= kY – hrPP = y(Y – F), y >0a. In the above model if P is an endogenous then P will be exogenous. In contrast if Pis endogenous then P= 0. True/false? Explain your answer.b. Plot the phase diagram of the above model in r - Y space|c. Use your graph, trace out the short-run and the long-run effect of an increase in marginalpropensity to consume (b) on equilibrium output, money supply, and the price level whencentral bank follows a fixed real money (M/P) policy. Plot the trajectory of Y,M andP against time.

The IS curve represents equilibrium in the product marketplace. It shows combinations of the…

Y=C(Y)+I(r)+G, Yd = Y-ty C=a+byd M = ky-hr P P = y(Y-Y), y >0 a. In the above model if P is an endogenous then P will be exogenous. In contrast if P is endogenous then P=0. True/false? Explain your answer. b. Plot the phase diagram of the above model in - Y space | c. Use your graph, trace out the short-run and the long-run effect of an increase in marginal propensity to consume (b) on equilibrium output, money supply, and the price level when central bank follows a fixed real money (M/P) policy. Plot the trajectory of Y,M and P against time.

Y=C(Y)+I(r)+G, Yd = Y-ty C=a+byd M = ky-hr P P = y(Y-Y), y >0 a. In the above model if P is an endogenous then P will be exogenous. In contrast if P is endogenous then P=0. True/false? Explain your answer. b. Plot the phase diagram of the above model in - Y space | c. Use your graph, trace out the short-run and the long-run effect of an increase in marginal propensity to consume (b) on equilibrium output, money supply, and the price level when central bank follows a fixed real money (M/P) policy. Plot the trajectory of Y,M and P against time.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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