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University of Texas ECO 34730_Solutions to IS-LM Practice Problems
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3
March 2023
2022/2023
A+
Solutions to IS-LM Practice Problems 1) Reproduce the following comparative static results: Effect of an increase in on Y r C I G + + ? - CS + + + - SP + + ? + T - - - + M + - + + P - + - - M T + - + + a) Increase in G: see IS-LM notes. b) Increase in CS: An increase in CS shifts the IS curve to the right. Thus, interest rates (r) and income (Y) must rise. For investment, since animal spirits are unchanged, only the interest rate matters. Thus, since r goes up, I must fall. For consumption, the ...
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