In: Economics
1. Indicate the effect of each of the following policies on the
variables: Y, C, S,...
1. Indicate the effect of each of the following policies on the
variables: Y, C, S, r, I, Ms, and Md
- The government reduces the personal income tax rates.
- Firms become more pessimistic about future sales.
- People believe that interest rates are going to fall in the
future so they transfer their assets from cash to bonds.
2. The Lupland economy is represented below:
C=100+0.8Y
S=-100+-0.2Y
I= 120-5i
Ms= 120
Md= 0.2Y-5i
Find equilibrium level of income and interest rate, show the
results on IS-LM graph.