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What happens to the IS and LM curves in the short-run when the government increases taxes?

LM curve: Nothing happens to the LM curve, because the LM curve deals with the financial market. The LM relation is M/P = YL(i). As you can see, taxes is not included in the LM relation. IS curve: The IS ...

Answered by Ilse V. • Economics tutor

6485 Views

Consider the following production function: Q = K^a + KL^(b+2), find the marginal product of capital.

The marginal product of capital (MPK) is defined as the additional unit of output, all things being equal, that comes with an additional unit of capital used.
The equation for MPK is: change in outpu...

Answered by Zachary F. • Economics tutor

4081 Views

Mr. A has utility function U(x,y) = ln(x) + ln(y) and budget constraint M = px + qy, solve for the demand functions x* and y* ?

We want to maximize U(x,y) subject to the constraint M = px + qy, where M is monetary income and p,q are the prices of x and y respectively. Since this is a constrained optimization problem we can use th...

Answered by Gian S. • Economics tutor

6836 Views

Given the following supply and demand functions find the Market Equilibrium point: Qs = 10 +15P Qd = 150 -5P. Now assume there is a positive shock in demand: Qd2 = 200 - 5P find the new Equilibrium Price and Quantity.

Market Equilibrium is one of the fundamental concepts in Economics. Graphically our equilibrium will be the point of intersection between Demand and Supply function. On the order hand, In order to solve i...

Answered by Alessandro S. • Economics tutor

5348 Views

A poor economy is at its steady state equilibrium. It is given a foreign aid package, to help it catch up with the developed world. Is this a good policy decision and why or why not?

As the production function remains the same, the economy has a temporary increase in output, but reverts back to its original steady state as the extra capital depreciates over time. This can be illustrat...

Answered by Silver K. • Economics tutor

1264 Views