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Problem I A closed economy is characterized by the next equations: C= 143 + 0,8 Yd; - consumption function, where Yd- disposable income; T= 161
Problem I A closed economy is characterized by the next equations: C= 143 + 0,8 Yd; - consumption function, where Yd- disposable income; T= 161 - taxes, 1 = 198 - 40 i- investment function, where i - interest rate; G = 285 - government expenditures; L = 0,5 y 6 i - money demand function; M = 847 - money supply; P=1 - price level. 1) derive the equations of LM and IS curves; 2) calculate the equilibrium interest rate and level of income; 3) derive the aggregate demand equation and plot its schedule, provided that the prices have risen to the level P=2
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