Q2. Consider the following macroeconomic models comprising of certain system of equations:

In this model i is iota

Model 1 Model 2

C = 50 + 0.8Y C = 0.8Y 30i

I = 20 5i I = 20 + 0.1Y 10i

L = 100 + 0.5Y i (iota) L = 30 + 0.06Y 60i

M = 200 M = 100

1. Assign economic label to each of the specified equation in both models.

2. Interpret the variables and their respective relationships captured by the signs in each

equation of both models. Compare what is different in the equation specification of

each model.

3. Identify the endogenous variables and solve Any One model for the respective

endogenous variables of the system (use any method for solving system of equations

either substitution method or matrix approach).