Dse 2009 macro

[Nikkita]

Please see Q- 53 of dse 2009: Here, by LM equation, change in Y/change in P = -ve So, LM shifts left. Also, by IS equation, considering e= EP/P*, we get change in Y/change in P= -ve So, IS also shifts left. Making graph, we get decrease in Y, ambiguous effect on e. But in one of previous discussion, no effect of shift in IS curve is shown. Why??

[Nikkita]

Also, please explain q-54..

[knowpraveen]

This is a question of how Y changes for a constant e, with increase in P. Y doesn't change for change in P, since Y is dependent upon e, so it doesn't matter even if e has other dependencies. That should be the reason. Based on the same argument we shall solve the 54th question as well.

You just twisted things around by considering the change in Y for a change in P, which you found out to be negative but e changes positively with P which has not been taken into consideration.

To put this in perspective, y=3x and let x=3p. For any change in p, the plot of x and y remains the same. It's exactly the same situation here.