Question
C = 0.4(Y - T) T = 500 I = 400 - 10r G = 500 Y = C + I + G Ms /
C = 0.4(Y - T) T = 500 I = 400 - 10r G = 500 Y = C + I + G Ms / P = Md / P = 0.2Y - 20r Ms = 600
a. derive an equation for the IS curve with Y as a function of r alone.
b. derive an equation for the LM curve with Y as a function of r alone.
c. What are the short-run equilibrium values of Y, r, Disposable Income, C, I, private saving, public saving, and national saving? Check by showing that C + I + G = Y and national saving equals I.
d. Graph the IS and LM curves from the equations derived from above. Be careful with axes labels and use points to fit the curves.
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