Use this information to determine your economy’s original AEP, AP, and IS curve. C=500-10r+0.9YD Ip=250-40r G=390...

Use this information to determine your economy’s original AE_P, A_P, and IS curve.

C=500-10r+0.9Y_D

Ip=250-40r

G=390

T=100+0.1Y

X=600

M=400+0.06Y

Use the four graphs we developed in class to determine the IS curve for this economy with r=0 and r=5. Show how the following change would affect this economy. You need to determine what has changed in the economy, what parts of the economy it affects, and how it changes the IS curve. Be sure to address any shifts as well as changes in slopes that may occur. You must show these changes mathematically, graphically, and then describe these changes verbally.
1. M = 400+0.01Y
Now, what happens to the economy when this change occurs? Return to your original equations. Suppose Consumers decide that credit is a good way to finance their expenditures on durables, so they become more interest sensitive, C=500-50r. Determine what has changed in the economy, what parts of the economy it affects, and how it changes the IS curve. Be sure to address any shifts as well as changes in slopes that may occur. Show these changes mathematically and graphically.

this is a two part answer please help :)

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Expert Solution

Rahul Sunny answered 1 year ago

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