Question
11) Algebra of IS-LM - use the following equations to solve the problems below. C=200+0.75(Y-T) I=200-25r G=T=100 Solve for the Goods Market equilibrium for given
11) Algebra of IS-LM - use the following equations to solve the problems below.
C=200+0.75(Y-T)
I=200-25r
G=T=100
Solve for the Goods Market equilibrium for given values of r = 0, 1, 2, 3....8%.This will give you the IS curve.
Let (M/P)d=Y-100r and M=1000, P=2 and solve for the Money Market equilibrium for values of r = 0,1,2,3 ... 8%.This will give you the LM curve.
Using your calculations in a) and b), what is the equilibrium r and Y that clears both the money and goods market?
If G rises to 150, which curve will shift (IS or LM) and how will Y and r change?Prove this with some calculations.
If M rises to 1200, with G=100, which curve will shift (IS or LM) and how will Y and r change?Prove this with some calculations.
If P increases to 4, with M=1000 and G=100, which curve will shift (IS or LM) and how will Y and r change.Prove this with some calculations.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started