# Which assumption do economists make which results in an up ward sloped AS curve?

Recall the following equations which describe an Show more Please help me to solve all 10 questions. Thank you Recall the following equations which describe an ISLM economy: C(YT)= C1+b*(YT) I(r) = I1 d*r G = G1 T = T 1 Md= L1+e*Yf*r r e a l M s = MP Suppose the economy is described by the following equations: C(Y T)=40+0.7*(Y T) I(r) = 300 30r G = T = 150 Md = 0.3Y 5r real Ms = 50 P Sob=0.7d=30e=0.3f=5 andL1=0. Note that we now use the real money supply or real money balances which is the nominal money supply divided by the price level. These equations give the following IS and LM curves: IS: r = 9.5 1 Y 100 LM: r=0.06Y 10 P 1. What is the marginal propensity to save? 2. If p = 10 use IS and LM to find equilibrium GDP then find equilibrium consumption and investment. 3. Describe one scenario in which autonomous investment could change. 4. Derive the AD curve. Do this by solving for price. 5. Which assumption do economists make which results in a vertical AS curve? 6. Which assumption do economists make which results in an up ward sloped AS curve? Describe one reason why this assumption might be true in the real world. 7. Draw the IS LM and AD curves described above. Include an upwardsloped AS curve. Be sure to label equilibrium Y and r with their exact values. Dont worry about finding the exact value of p. 8. Name one exogenous and one endogenous variable in the ISLMADAS model. 9. Recall your drawing for question #10. Now draw what happens when government spending increases by 10 (i.e. draw the proper curve shifts). Label the exact numerical change in equilibrium GDP. Use the following government spending multiplier: MGISLM = 1/(1b+ de f ) Show less

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