Question 4. (1) As discussed, the IS-LM model can explain the impact of fiscal policy to aggregate output (Y). For the IS curve, government purchase (G) is an endogenous or exogenous variable? How a lower government purchase G would affect Y? How to illustrate the change graphically? (2) For the LM curve, use your language to explain how the supply of real money balance is related to total money supply (M) and the price level (P). For M and P, which one is endogenous or exogenous to the LM model? (3) Use your language to explain how to derive the aggregate demand (AD) curve from the IS- LM model? How the AD curve is sloped and why?

Question 4. (1) As discussed, the IS-LM model can explain the impact of fiscal policy to aggregate output (Y). For the IS curve, government purchase (G) is an endogenous or exogenous variable? How a lower government purchase G would affect Y? How to illustrate the change graphically? (2) For the LM curve, use your language to explain how the supply of real money balance is related to total money supply (M) and the price level (P). For M and P, which one is endogenous or exogenous to the LM model? (3) Use your language to explain how to derive the aggregate demand (AD) curve from the IS- LM model? How the AD curve is sloped and why?

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 8PA

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