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IS Curve Analysis and Equilibrium Explanation

The document contains questions related to the IS curve in economics, including its derivation, equilibrium points, and the impact of changes in government spending. It provides specific equations for consumption, investment, government spending, and taxes, and asks for calculations of national income at different interest rates. Additionally, it explores the effects of government expenditure on the IS curve and requires graphical representation and analysis of shifts in the curve.

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tomshave28
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11 views2 pages

IS Curve Analysis and Equilibrium Explanation

The document contains questions related to the IS curve in economics, including its derivation, equilibrium points, and the impact of changes in government spending. It provides specific equations for consumption, investment, government spending, and taxes, and asks for calculations of national income at different interest rates. Additionally, it explores the effects of government expenditure on the IS curve and requires graphical representation and analysis of shifts in the curve.

Uploaded by

tomshave28
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

QUESTION 20

a) By using an appropriate graph, describe how IS curve is published .

b) Based on answer (a), explain why point to right and to left the IS curve is not at
equilibrium point in goods market.

c) Given :

C = 250 + 0.70Yd, where Yd = Y - T


I = 250 - 200r
G = 250
T = 20 + 0.1Y

i ) Derive equation for IS curve . (3 marks )

(ii) Based on equation IS curve as in answer (c( i )), calculate gradient IS curve .
(2 marks )

dY / dr = …. 1/k

(iii) Calculate the value balance national income if interest rate is 10 percent and 20
percent .
(3 marks )
Answer(10%) Y=1933.20 Answer (20%) Y=1879.20

(iv) Based on value multiplier expenses government , write the IS equation which
new when expenses government increase by 100.
(2 marks )
QUESTION 18

Given :

C = 300 + 0.75Yd, where Yd = Y - T


I = 200 - 300r
G = 200
T = 10 + 0.2Y

a) Derive equation for IS curve . (3 marks )

b) Based on equation IS curve as in answer (4(a)), calculate gradient IS curve .


(2 marks )

dY / dr = …

c) Calculate the value balance national income if rate flowers is 10 percent and 20 percent .

Answer (10%) Y=1656.25 Answer (20%) Y=1581.25

d) Based on answer question (c), draw IS curve . (2 marks )

e) If value multiplier expenses government is 4, write it down the new IS equation when
expenses government increase of 100. (3 marks )

f) Based on answer question (4(e)), draw the original and new IS curves in a diagram.
(4 marks )

g) Do the new IS curve this parallel by the original IS curve ? Explain why . (2marks)

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