Assume that we have the following data:
C=100+0.50Y
Ip=100-20r
Mt=0.10Y
Ms=100-10r
M=80

a. Build the IS-LM function.
b. If we assume an increase in Investments by 100 units, please calculate again the IS-LM functions.
c. The intersection of IS-LM functions defines four areas. Please analyze the behavior of the markets for goods and money for each area.

Cite references to material that you use.

 

Accurately described (graphically or verbally) the IS-LM functions.

 
Accurately describe (graphically or verbally) the shift of the IS-LM function when Investments increase by 100 units.

 
Describe each of the four areas defined by the IS-LM function.

 
Use at least one example.