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Help with macroeconomics homework??

Exams are coming up soon and we were instructed to use past papers to study but there's no answers available .. these are the questions im stuck on, someone please help :/ !! :

Q1 (i) Use the IS-LM model to describe the effects of the following changes on national income, the interest rate and investment:
(a) An increase in money supply
(b) An increase in government purchases.
(ii) Use the theory of liquidity preference to explain why an increase in the money supply lowers the interest rate. What does this explanation assume about the price level?


Q 2 Consider the impact of an increase in thriftiness in the Keynesian cross. Suppose that the consumption function is given by C = C + c(Y T ) , where C is
autonomous consumption, the parameter c is the marginal propensity to consume, Y is income and T is taxes.
(i) What happens to equilibrium income when the society becomes thriftier, as represented by a decline in C ?
(ii) What happens to equilibrium saving?
(iii) Does this paradox arise in the classical model why or why not?


Q 3 Explain why Keynes’s General Theory is a monetary theory of output determination.
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Original post by SarahKelly1993
Exams are coming up soon and we were instructed to use past papers to study but there's no answers available .. these are the questions im stuck on, someone please help :/ !! :

Q1 (i) Use the IS-LM model to describe the effects of the following changes on national income, the interest rate and investment:
(a) An increase in money supply
(b) An increase in government purchases.
(ii) Use the theory of liquidity preference to explain why an increase in the money supply lowers the interest rate. What does this explanation assume about the price level?

a) increase of M pushes out the LM curve, so r goes down and Y goes up.
b) increase in G pushes out the IS curve, so r goes up and Y goes up.
ii. If the amount of money in the economy increases and price level stays fixed, then each person will on average have more money. Some they will spend (increasing Y) and some they will save (lowering the interest rates).




Q 2 Consider the impact of an increase in thriftiness in the Keynesian cross. Suppose that the consumption function is given by C = C + c(Y T ) , where C is
autonomous consumption, the parameter c is the marginal propensity to consume, Y is income and T is taxes.
(i) What happens to equilibrium income when the society becomes thriftier, as represented by a decline in C ?
(ii) What happens to equilibrium saving?
(iii) Does this paradox arise in the classical model why or why not?

i) Equilibrium output decreases as consumption drops
ii) equilibrium savings remain constant
iii) No. The initial drop in output will cause an drop in prices, wages will follow, and output will return to its original state but with a higher rate of savings.


Q 3 Explain why Keynes’s General Theory is a monetary theory of output determination.


money supply controls output
Q1 (i) Use the IS-LM model to describe the effects of the following changes on national income, the interest rate and investment:
(a) An increase in money supply
(b) An increase in government purchases.
(ii) Use the theory of liquidity preference to explain why an increase in the money supply lowers the interest rate. What does this explanation assume about the price level?

An increase in the money supply, would decrease interest rate, increase National Income and investment. An increase in the government purchases would increase interest rate (think of crowding out affect), and decrease investment and National Income.

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