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IS-LM Analysis for Policy Solutions

This document outlines two problems from an economics textbook chapter asking the student to use an IS-LM diagram to suggest policy mixes that achieve specific objectives: (1) Increase output (Y) while keeping interest rates (i) constant, and (2) Decrease the government budget deficit while keeping output (Y) constant. The student must justify their answers using the diagram and explaining their reasoning.

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Christian Josué Recinos
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7 views1 page

IS-LM Analysis for Policy Solutions

This document outlines two problems from an economics textbook chapter asking the student to use an IS-LM diagram to suggest policy mixes that achieve specific objectives: (1) Increase output (Y) while keeping interest rates (i) constant, and (2) Decrease the government budget deficit while keeping output (Y) constant. The student must justify their answers using the diagram and explaining their reasoning.

Uploaded by

Christian Josué Recinos
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

PROBLEM SET 5

Problems for Chapter 5


1.

For each part below, start with and IS-LM diagram drawn like that below.
i

LM
A
i1

IS
Y1

Suggest a mix of monetary and fiscal policy that will achieve the following objectives.
Justify your answers by using the diagram and explain your reasoning.
a.
b.

Increase Y while keeping I constant at i1.


Decrease the government budget deficit while keeping Y constant at
Y1.

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