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Consider the economy as follows: IS equation: Y = 3,600 + 3G - 2T - 250 r LM equation: Y = 2 (M/P) + 200
Consider the economy as follows: IS equation: Y = 3,600 + 3G - 2T - 250 r LM equation: Y = 2 (M/P) + 200 r I = 3,100 - 150 r I = Planned Investment C = 300 + 0.6 (Y - T) C = Consumption Long run eqilibrium for this economy is 4,200 T = Taxes Price = P = 1 G = 2,300 G = Government Spending
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