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Consider an economy where GDP is given by Z = (Y -T) - G - I(r), C(Y -T)-C 0 -C 1 (Y -T) I(r) =
Consider an economy where GDP is given by
Z = (Y -T) - G - I(r),
C(Y -T)-C0 -C1 (Y -T)
I(r) = I0 I1 r
where Z is planned expenditure,
Y is GDP
T is taxes,
G is public consumption
I are investments
r is interest
C0, C1, I0, I1 > 0 are all parameter and C1 < 1. T and G are exogenous variables. In this part of the task is r exogenous too.
How can I discharge the IS curve, i.e. discharge Y as a function of r, G, T ?
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