Page 169 - DECO201_MACRO_ECONOMICS_ENGLISH

Macro Economics

Notes 4. Explain how an equilibrium level of national income and an equilibrium rate of interest
are determined simultaneously at the point of intersection of the IS and LM schedules.
5. An upward shift in the consumption function leads to a rightward shift in the IS schedule.
Comment.
6. A consumption function is given by the equation
C = 10+0.75Y

and investment function by
I = 48–8i
Using the equilibrium conditions
S = I, trace out the IS-curve.

7. C = 100+0.8Y
I = 150–600i
MS = Rs 200 crore
M = 0.20Y
1
M = 50–400i
2
From the above information, find the equilibrium level of income and the equilibrium
rate of interest. What is the level of consumption and investment at the equilibrium level
of income?
8. Describe the properties of IS-curve
9. Explain the properties of LM-curve.

10. The equilibrium levels increase and interest rates change when either the IS or LM-curve
shifts. Validate

Answers: Self Assessment

1. True 2. False

3. True 4. (c)
5. (c) 6. (b)
7. (a) 8. (d)
9. Reserve Bank of India 10. rate of interest
11. positive 12. right

13. An increase 14. True
15. True 16. False

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