A two-equation model below represents goods sector and monetary sector equilibrium for a hypothetical economy (1):Y=i 0 /1-c+b/1-c.r i 0 >0, b <0, 0 0,

A two-equation model below represents goods sector and monetary sector equilibrium for a

hypothetical economy

(1):Y=i₀/1-c+b/1-c.r i₀>0, b<0, 0

(2): Y=i₀-e/f-g/f.r L_o>0, f<0, g<0, e>0.

As usual, is aggregate income, is the interest rate, 0 is the autonomous investment, and

0 is the level of money supply.

i) List down the endogenous variables and the exogenous variables of the model.

ii) Which equation represents the IS and which represents the LM

iii) Justify your answers found in ii).

iv) Find the equilibrium of the economy

v)Suppose now, the monetary authority decides to increase the quantity of money

supply to a new level, evaluate the effect of such changes to the economy

vi)Now, rewrite the equation (1) and (2) respectively in their implicit-forms

equivalence.