Statistics Help
Question: The simple IS/LM macroeconomic model presented in the text resulted in two equations for the two unknowns, Y and R:
y:3000 + 5(M/P + 2.5G
R:0.3 - 0.0005(M/P) + 0.00025G
Solve for the actual values of Y and R, now assuming that
G=3000, M:400,000, and P:200.
(b) Now conduct a comparative static analysis on the model to determine the impact
of a change in M, (delta)M,on Y and R, ceteris paribas. Assume that (delta)M : 400. Edit
Answer: R= 0.3 - 0.0005(M/P) + 0.00025G
= 0.3 - 0.0005*(400000/200) + 0.00025*3000 = 0.05
y = 3000 + 5(M/P) + 2.5G = 3000 + 5* (400000/200) + 2.5* 3000 = 20500
Edit
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