ISLM Practice Problem Part 1 - Deriving the IS and LM Curves, and the IS-LM Diagram

This problem deals with the IS LM model - Given equation descriptions of consumption, investment and money demand - and given values for government purchases, taxes, the money supply, we calculate the IS Curve, we build the LM Curve, and we find equilibrium output (or income, or Y*) and the equilibrium interest rate (r*). More Macroeconomics Problems: https://sites.google.com/site/curtisk... ___________________________________________________________ Consider the economy of Hicksonia. 2:30 a. The consumption function is given by: C=200+0.75(Y-T) The investment function is: I=200-25r Government purchases and taxes are both 100. For this economy, graph the IS curve for r changing from 0 to 8 5:30 b. The money demand function in Hicksonia is (M/P)^d=Y-100r The nominal money supply is 1000 and the price level P is 2. For this economy, graph the LM curve for r ranging from 0 to 8 9:00 c. Find the equilibrium interest rate r and equilibrium level of income Y.    • IS-LM Curves and Diagram - Fiscal Shock an...   d. Suppose that government purchases are raised from 100 to 150. How does the IS curve shift? What are the new equilibrium interest rate and level of income?    • IS-LM Model & Diagram - LM Curve Shift fro...   e. Suppose instead that the money supply is raised from 1000 to 1200. How does the LM curve shift? What are the new equilibrium interest rate and level of income?    • IS-LM Curves and Diagram and a Change in t...   f. With the initial values for monetary and fiscal policy, suppose that the price level rises from 2 to 4. What happens? What are the new equilibrium interest rate and level of income?    • IS-LM Equations - Deriving Aggregate Deman...   g. Derive and graph an equation for the aggregate demand curve. What happens to this aggregate demand curve if fiscal or monetary policy changes, as in part (a) and (e)? from Mankiw's Macroeconomics (8th ed) - Aggregate Demand Part 2 (Chapter 12) - Problem 3 ----------------------------------------------------------------