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Assume the equation for the IS-curve is: Y = 4(300 - 10i) and the equation for the LM-curve is: Y = 4(100 + 10i). Part
Assume the equation for the IS-curve is: Y = 4(300 - 10i) and the equation for the LM-curve is: Y = 4(100 + 10i).
Part A: Calculate the levels of income (Y) and interest rate (i) when there is a simultaneous equilibrium in the money market and the goods market. (Show your calculations)
Part B: If autonomous investment increases by 100
a) What will happen to the IS curve?
b) By how much will the IS curve change? (show your calculations) (5 points) c) What is the equation for the new IS curve?
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