In 2008, the world entered the worst recession since the Great Depression of the 1930s. Of course, many people lost their jobs and houses while…
September 3, 2020
QUESTION MAR 05, 2019 What is one disadvantage of a corporation?
September 3, 2020

Suppose Equilibrium in a financial market:

M/P = YL(i)

a. what is  an expression for Y in terms of i (i.e. Y = ….)

b. suppose the central bank holds the money supply constant. Using part a’s answer, derive dy/di. What’s the sign? How does it relate to the slope of LM curve derived in class? (hint: if y=1/f(x), then y’= -f’/f(x)^2)

Now suppose that equilibirum in financial markets is:

M/P = Y (.25 – i)

c. derive an expression for Y in terms of i (i.e. Y = …)

d. suppose the central bank holds the real money and supply constant. using part c’s answer, derive dy/di. whats the sign? if there is a small increase in i, by how much does output need to increase to maintain equilibrium in financial market?

KM
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