1- Equilibrium-defining equations in an IS-LM model are presented as follows:Y=C+I+G, C = C₁ + f(Y) = g(r), I = 1o — h(r),G = Go, and Mo =3Y - i(r)where Co, Io, Go, Mo> 0 are exogenous variables, and f, g, h, i are continuously differentiablewwwwwwand strictly increasing functions satisfying:Y = C₁ + f(Y) = g(r*) + Io − h(r) + GoMo 3Yi(*).=for the unique equilibrium (rª,Y*). You should also assume that f' (Y) = (0, 1) (Why?). Finddr*/d Mo and dy* /d Go, and interpret your results.

This question is about the IS-LM model, which is a macroeconomic model that represents the…

for the unique equilibrium (r*,Y*). You should also assume that f' (Y) = (0, 1) (Why?). Find dr/d Mo and dy*/d Go, and interpret your results.

for the unique equilibrium (r,Y). You should also assume that f' (Y) = (0, 1) (Why?). Find dr/d Mo and dy*/d Go, and interpret your results.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1- Equilibrium-defining equations in an IS-LM model are presented as follows:
Y=C+I+G, C = C₁ + f(Y) = g(r), I = 1o — h(r),
G = Go, and Mo =
3Y - i(r)
where Co, Io, Go, Mo> 0 are exogenous variables, and f, g, h, i are continuously differentiable
wwwwww
and strictly increasing functions satisfying:
Y = C₁ + f(Y) = g(r*) + Io − h(r) + Go
Mo 3Yi(*).
=
for the unique equilibrium (rª,Y*). You should also assume that f' (Y) = (0, 1) (Why?). Find
dr*/d Mo and dy* /d Go, and interpret your results.

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