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Macro Assignment 3

The document provides instructions for Assignment Three of the ECON2021D Basic Macroeconomics course at the Chinese University of Hong Kong. It outlines submission requirements, including answering questions on separate pages with identifying information and page numbers, and submitting photos or a scanned PDF. It also notes that submissions will be graded on a pass/fail basis, with emphasis placed on effort over correctness. The assignment then lists three questions for students to answer related to deriving and analyzing IS and LM curves through diagrams.

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55 views2 pages

Macro Assignment 3

The document provides instructions for Assignment Three of the ECON2021D Basic Macroeconomics course at the Chinese University of Hong Kong. It outlines submission requirements, including answering questions on separate pages with identifying information and page numbers, and submitting photos or a scanned PDF. It also notes that submissions will be graded on a pass/fail basis, with emphasis placed on effort over correctness. The assignment then lists three questions for students to answer related to deriving and analyzing IS and LM curves through diagrams.

Uploaded by

ching lam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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The Chinese University of Hong Kong

ECON2021D Basic Macroeconomics


2nd term, 2020-21

Assignment Three
Submission deadline: 5:00pm, 15th March 2021
[To make sure that you submit by the deadline, you are advised to submit one hour before the
time above]

General instructions:
1. You should submit your assignment via Blackboard and strictly comply with the
requirements as can be found in the introduction for Assignment 1 posted on Course
Content, Blackboard. Some of these are reproduced as “specific instructions” below.
2. All the questions below are of similar format and difficulty to the final exams of my classes.
My goal is to provide you some exercises that help you cope with the final exam instead of
testing your ability in this occasion. Hence, the marking standard is deliberately SOFT. You
will be either given a grade of “PASS” or “FAILURE”. So, submission is all-important for
getting the marks from assignments. Non-submission always implies “FAILURE”. You
should not worry too much about whether you can submit correct answers for grading,
provided that you have really spent time on thinking about the solutions and practise.
3. Don’t waste time on plagiarizing. You will get a “PASS”, provided that you have shown
sufficient efforts exerted, regardless of whether your answer is 50% or 100% correct. But
you will surely learn nothing if you haven’t tried doing the questions yourself. On the other
hand, you should feel free to discuss your answers with your classmates. We emphasize more
on the process of thinking about, instead of the results of, assignments.
4. We will discuss assignment answers in tutorials after the submission deadlines. Nevertheless,
our policy is NOT to post any answers on the web. We will NOT release any softcopy or
hardcopy of answers. The only way for you to get the answer is to attend tutorials for the
verbal explanations given by tutors.

Specific instructions:
Submission format:
1. You should prepare sufficient white papers as your answer sheets. Don’t use papers
with colour(s). Don’t type. Answer by handwriting.
2. Before answering any questions, write down the following on the first page: (a) Student
Full Name in Block English, (b) Student ID in CUHK, (c) The course code, and (d) the
assignment number (e.g. write "Assignment 1").
3. Always use a new page when answering a new question. Also, write down the relevant
question number at the beginning of your answer to that question (e.g. “Q1 or
question 1”).
4. Write down the page number of each page clearly.
5. When you finish, take photos of all the answer pages in consecutive sequence, and
submit the photos via Blackboard. Alternatively, you can scan all the answer pages in
consecutive sequence and combine them into a single pdf file. The photos for
submission must be properly taken. In particular, a demo has been uploaded and you
should submit in a form similar to it.
Notes:
1. Combing pages into one file enables you to submit faster. If you don't have a
pdf software for combining pages into a single file, you can download this pdf editor for
free. You should choose ‘FREE’ when there is option to choose during installation. You
had better try it well before your submission.
2. If the marker finds that he cannot mark your submission due to the improper format
(find "photo submission format" in the Blackboard introduction of Assignment 1), he
will send you email to require re-submission. So, marks will be reduced if you fail to
comply with the requirements above.
Punctuality: Late submission will be given zero mark.
1. Answer both questions below:
(a) Derive the IS curve, putting i on the left and Y on the right side.
C = a + b(Y-T); I = e – i; G = X = IM = 0
(b) Derive the LM curve, putting i on the left and Y on the right side.
Md = PY(1 − φi); Ms = 100

2. Consider two IS curves.


i

IS2

IS1
O Y
The simultaneous equilibrium in both goods market and money market is originally
represented by point E.
(a) Suppose price level is fixed in the short run. With an aid of a diagram,
compare the effects of a decrease in money supply on output and interest rate
for IS1 and IS2.
(b) Give ONE reason why IS curve is steeper.
(c) Suppose money supply is fixed but the price level rises, what will happen to IS
curve and LM curve? You should draw a diagram to illustrate the market
situation behind a IS curve or a LM curve.
(d) Draw two aggregate demand (AD) curves that correspond to IS1 and IS2.
Clearly indicate if IS1 will be represented by a steeper or a flatter AD. You
should use diagrams to illustrate how AD can be derived from the IS-LM
model.

3. Consider a money demand dunction Md = PYφ/i.


(a) What is the money market equilibrium condition? Please write down the
condition in the form of some relevant equations. Then, write the equation for
LM curve with only i on the left side.
(b) From the LM equation derived in (a), draw the LM curve. Indicate the slope
of this LM curve in the diagram. In this model, what factor(s) will make the
LM curve flatter?

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