# ECONOMIC GROWTH IN MACROECONOMICS

*label*Economics

*timer*Asked: Mar 12th, 2015

**Question description**

Y=C+I+G C=C(Y-T) I=I(r) G=G T=T(Y) M/P=l(r,Y)

a). Identify each of the above equations and explain their behavioral assumptions. Where applicable, compute the relevant partial derivatives and indicate their signs and magnitudes.

(b). Derive an expression for the IS multiplier and investigate its sign and show how the magnitude of the multiplier compares with one. What does this result implies?

(c). Derive an expression for the slope of the IS curve and investigate its sign. Under what condition/conditions will the IS curve be vertical in the r-Y space? Under what condition/conditions will the IS curve be horizontal in the r-Y space?

(d). Derive an expression for the slope of the LM curve and investigate its sign. Under what condition/conditions will the LM curve be vertical in the r-Y space? Under what condition/conditions will the LM curve be horizontal in the r-Y space?