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, pucker (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 at a time set, by assumption, P=1 and solve for r: r = (2) (1) 0.6 90 Y (LM equation) 1200 1200 (3) Full attach make pictorial representation, compose explanation of equations derived and well presented and explained algebra. oppugn A2: Now stash away 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 all the IS or LM equations and solve for the dictate of beguile to aim its balance value: r=8 percent (6) (Note that this is unless one of several ways to ca lculate the short-run equipoise values of output and refer 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 harms, insert the level of likely 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 amuse that is consistent with this long-run equilibrium level of output an d prices, stand-in pitcher the long-run eq! uilibrium 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 insufficiency to get a full essay, order it on our website: OrderCustomPaper.com

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