Just MACRO ECONOMICS Expert!!

Name

Econ 301 Quiz 2

1. Using the IS/LM model, AD/AS, the Asset Market:

Goods Market: Money Market:

C=1275+.5(Y-T)-200r M/P=9000/P

I=900-200r L(r,y)=.5y-200*i

G=450 Long-Term Inflation: 0%

T=450 Natural Rate of Unemployment: 5%

a. (5pts) What are the IS and LM equations if the price level is 100?

b. (5pts) Calculate and show the equilibrium output and interest rates?

c. (10pts) Considering a Keynesian Model, show graphically what happens to P, Y, and r in the SR when the Federal Reserve conducts an open market sale of 4500.

d. (10pts) What is the short run Y and r?

e. (20pts) Suppose instead the government conducts a balanced budget expansion of 120 units. Redo d and e.