Completed quickly and followed instructions given. Grammar, spelling, etc. was all good as well. Thank you so much! Will hire in the future.
Assume the model: And pay attention to the model in answering the questions
Y = C + I + G + X – M
C = a + b Yd where a > 0 and 0 < b < 1
I = f (i) but I ≠ f (Y) ie, MPI = 0
G = Go
Ms = Mso Ms = money supply/stock
Tx = Txo ……..meaning that Tx ≠ f ( Y )
Md = Mt(Y)+ Ml(i) [Mt = transactions demand; Ml = liquidity preference demand]
X = Xo X = exports
M = Mo + mY where Mo is autonomous imports, and m is the marginal propensity to import
In each of the following cases, indicate the effect of the given autonomous change (or policy measure) on each of the listed variables. In each case indicate whether the listed variable increases in value, decreases, or does not change.
Note: Answer beside the listed variable. For example, if in I an increase in the money supply does not bring about a change interest rates, write “does not change” beside “interest rates” at I, 1. And if an increase in the money supply causes a decrease in the level of income, write “decreases” beside “level of income” at I, 2
I. An increase in the money supply:
1. Interest rates
2. Level of income
5. Government spending
II. A decrease in the public’s liquidity preference:
6. Level of income
III. An increase in the marginal propensity to import:
12. Amount of money demanded for transactions purposes
13. Bond prices
17. Money supply
IV. An increase in exports:
20. Interest rates
22. Money supply
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