macro soln

2
1a) X Axis i Y Axis Y Upward Sloping LM, Downward Sloping IS When people become wealthier, their income is more, so the AD will rise & Y will eventually rise So, the IS curve will shift rightward (blue line). I will increase. 1b) C will increase, I will decrease, un employment will rise

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IS LM soln

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Page 1: Macro Soln

1a)

X Axis i

Y Axis Y

Upward Sloping LM, Downward Sloping IS

When people become wealthier, their income is more, so the AD will rise & Y will eventually rise So, the IS curve will shift rightward (blue line). I will increase.

1b) C will increase, I will decrease, un employment will rise

Page 2: Macro Soln

2a)

X Axis i

Y Axis Y

Upward Sloping LM, Downward Sloping IS.

Demand for money will rise, so i will increase & Y will decrease. LM curve shifts upward (green line)

2b) I will decrease, unemployment will rise & C will remain unchanged.