IS-LM and Open-economy Models - Macroeconomics - Economics Previous Year Questions

Consider a closed-economy IS-LM model. The IS and LM equations are
\[ Y = C(Y) + I(z) + \bar{G} \]
\[ \frac{\bar{M}}{\bar{P}} = k Y - l i \]
where Y is the output, C is the consumption (C' > 0), I is the investment (I' < 0), z ≡ i − πᵉ, i is the nominal interest rate, πᵉ is the expected inflation, \bar{G} is the government purchases, \frac{\bar{M}}{\bar{P}} is the fixed real money balances, and k and l are positive constants.
Suppose everyone in the economy suddenly expects the inflation to rise in the future. Assuming that the LM curve remains unchanged, what will happen in the short-run?

Consider a Mundell-Fleming model for a small open economy with perfect capital mobility. The goods market equation is \[ Y = C(Y) + I(r^*) + G + NX(e) \] where \( Y \) is the output, \( C \) is the consumption (\( C' > 0 \)), \( I \) is the investment (\( I' < 0 \)), \( G \) is the government purchases, and \( NX \) is the net exports (\( NX' < 0 \)), \( r^* \) is the fixed world interest rate, and \( e \) is the exchange rate.
The money market equation is \[ \frac{M}{P} = kY - l r^* \] where \( M \) is the money supply, \( P \) is the fixed price level, and \( k \) and \( l \) are positive constants.
Which of the following policies is/are ineffective (i.e., have no impact on income) in the short-run?

Consider the two scenarios for a small open economy based on the Mundell-Fleming IS-LM model with floating exchange rate and perfect capital mobility

Scenario I	Scenario II
\( Y = C(Y-T) + I(r^{*}) + G + NX(e,Y) \) \( \frac{M}{P} = L(r^{*},Y) \)	\( Y = C(Y-T) + I(r^{*}) + G + NX(e) \) \( \frac{M}{P} = L(r^{*},Y-T) \)

where \( Y \) is aggregate income, \( C \) is aggregate consumption, \( I \) is investment, \( r^{*} \) is world interest rate, \( G \) is government expenditure, \( T \) is taxes, \( NX \) is net exports, \( e \) is exchange rate, \( M \) is money supply, and \( P \) is general price level.
\( I \) has a negative relationship with \( r^{*} \). \( NX \) depends negatively on both \( e \) and \( Y \), and \( P \) is fixed.
Given the above information, which of the following statements is/are CORRECT?

Let \(Y\) be income, \(r\) be interest rate, \(G\) be government expenditure and \(M^s\) be money supply. Consider the following closed economy IS-LM equations with fixed general price level (\(P\)): IS equation: \[ Y = 490 + 0.6Y - 4r + G \] LM equation: \[ \frac{M^s}{P} = 20 + 0.25Y - 10r \] If \(G\) is 330 and \(\frac{M^s}{P}\) is 500, then the equilibrium \(Y\) is __________ (round off to one decimal place)

Consider the following IS-LM model where, \(C_0\) is autonomous consumption, \(c\) is marginal propensity to consumption, \(T_0\) is the autonomous tax, \(t\) is the tax rate on income \(Y\), \(b\) is the interest sensitivity of investment to real interest rate \(r\), \(M^S\) is exogenously determined nominal money supply, \(P\) is the aggregate price level, \(l_1\) is the income sensitivity of money demand to income, \(l_2\) is the interest sensitivity of money demand
Consumption function: \(C = C_0 + cY^d; 0 < c < 1\)
Disposable Income: \(Y^d = Y - T\)
Tax function: \(T = T_0 + tY; 0 < t < 1\)
Investment function: \(I = I_0 - br; b > 0\)
LM equation: \(\frac{M^S}{P} = l_1Y - l_2r; l_1 > 0, l_2 > 0\)
Closed economy without government: \(Y = C + I\)
Which one of the following options gives the investment multiplier \(\left(\frac{\partial Y}{\partial I_0}\right)\)?