April 25, 2003
Friday's Review Session
Derive the IS and LM curves.
You can think of these derivations as instances of the implicit function theorem or you can regard them as solving two equations (shown above) in two unknowns (Y and R).
Can you show that bonds suffer more from an increase in inflation than do bonds?
Finally, can you figure out which was to shift when there are six possibilities? Hint: read the question carefully.
