Mock Exam – 2

Q.1 Consider the following model

a. Enlist the endogenous and exogenous variables of the model

b. Find the reduced form of when

i.
ii.
iii.
c. Solve the model when (a) , (b) in (ii) above for reduced form of {hint:- use L operator
simplify (ii) as we did in the class}

Q.2 Consider the following IS-LM and TR model

a. Enlist the endogenous and exogenous variables of the model.

b. Plot the above model in r-y space.
c. Is LM curve redundant in this model? Explain your answer.
d. Use your graph trace the trajectory of an increase in and .

Q.3 Consider the following IS-LM and TR model

IS

LM

TR

a. Find the reduced form of and find its variance

b. Use your reduced form of and TR in p-y space
c. Use your graph and trace the trajectory of y and p in the event of an increase in g.

Q.4 Consider the following IS-LM model

Find Eigen values and Eigen vectors of the matrix and solve the above model for reduced form
of and as a function of time which can be simulated in the event of shock such as g and m.