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C = 108 + 0.82(1-0.25)Y I = 900 900R G = 500 - 0.1Y M D = 0.85Y - 1800R M S = 4500 i)
C = 108 + 0.82(1-0.25)Y I = 900 900R G = 500 - 0.1Y M D = 0.85Y - 1800R M S = 4500 i) Write down the condition for equilibrium in the goods market and obtain an expression for the IS curve. 2 pts ii) Write down the condition for equilibrium in the money market and obtain an expression for the LM curve. 2 pts
iii) Find equilibrium income and the equilibrium rate of interest. 3 pts iv) Draw the diagram. 2 pts
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