Hiya, I have three questions I need help on using the following model:
Question 1.) Using only equations 1, 2 and 3 and assuming r is exogenous, an increase in G will cause output to rise by what?Answer is 1/(1-a1)*change in G
Question 2.) Using the full model, an increase in G will cause output to rise by what?Answer is y/[1-a1)y+B%]*change in G where %= phi
Question 3: Letting P=1, if the money supply M rises, the output will....?Answer is rise by B1 / [(1-a1)y +B1%]*change in M
Any sort of direction towards the answers will be greatly appreciated! For question one I started by putting the long equation for y = C +i +g into the money supply equation but I'm just getting a really long winded answer when the answer is quite simple.
Intermediate macro help Watch
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Last edited by alixxxxxx1; 26-12-2010 at 19:02.
- 26-12-2010 18:49