Consider an economy with the following IS and LM curves Y= 4350-800r+2G-T (M/P)= 0.5Y - 200r Suppose
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Question:
Consider an economy with the following IS and LM curves
Y= 4350-800r+2G-T
(M/P)= 0.5Y - 200r
Suppose that T= 450, G=450 and M=900.
Required
a)Find an equation for the aggregate demand curve. 5mks
b)If the full employment level of output is Y=46000, what are the equilibrium value for r and p? 10mks
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