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a) b) (30 points) Consider the following version of the IS-LM model: Goods Market: C =40 11/ 1T 1T2 =0t 3l T3 I =20-2i G

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a) b) (30 points) Consider the following version of the IS-LM model: Goods Market: C =40 11/ 1T 1T2 =0t 3l T3 I =20-2i G 1T+1T2 74" '35 Money Market: 1 M2 =4y j 2 MS:MQ (3 points) What is the equilibrium condition in the money market? (7 points) Write this system of equations as a matrix equation that has the form Ax = b where X = (Hint: Substitute Go into the first equation and use the equilibrium condition from the money market before forming the matrix equation. This should leave you with four equations). c) (8 points) Does this matrix equation have a unique solution? Why? d) (12 points) Solve for the equilibrium interest rate

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