After reading all the available information carefully, prepare a 1 page (double-spaced) essay and answer the following questions:
Assume that we have the following data:
a. Build the IS-LM function.
b. If we assume an increase in Investments by 100 units, please calculate again the IS-LM functions.
c. The intersection of IS-LM functions defines four areas. Please analyze the behavior of the markets for goods and money for each area.
Cite references to material that you use in preparing the essay.
Your essay will be graded on the following:
- Accurately described (graphically or verbally) the IS-LM functions.
- Accurately describe (graphically or verbally) the shift of the IS-LM function when Investments increase by 100 units.
- Describe each of the four areas defined by the IS-LM function.
- Use at least one example in the essay.
- Organization Grading Guidelines: Presentation is very effective and presented in a logical format with a clear beginning, middle, and end. There is a clear statement of ideas and smooth transitions. The writer has stated the main idea clearly and has provided relevant details. The main idea is clearly conveyed in a presentation that is highly relevant and interesting. The student provides evidence of thoughtful input. Details are rich and appropriate. Spelling, punctuation, and capitalization are virtually always correct.