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Consider the following version of the IS-LM model: Y = C(Y ) + I(r) M 0 s = L(Y, r) where Y and r are
Consider the following version of the IS-LM model:
Y = C(Y ) + I(r)
M0s= L(Y, r)
where Y and r are endogenous. C, I, L are continuously differentiable functions.
(a) Obtain the total differentials of the two equations. Express them in a system of linear equations.
(b) Derive expressions for the equilibrium effects of money supply M0son the endogenous variables.
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