Question
Suppose that the following equations describes an economy: Consumption function: Investment function: Taxes: Government Spending: C(Y-T) .5(Y-T)+30 I(r)=22-r T=30 G=10 Demand for real money
Suppose that the following equations describes an economy: Consumption function: Investment function: Taxes: Government Spending: C(Y-T) .5(Y-T)+30 I(r)=22-r T=30 G=10 Demand for real money balances: Money supply: Price level: L(r, Y) .5Y +12 M=350 P=7 a. Given the above equations, find the equation for the IS curve. Express the IS curve as r(Y). b. Given the above equations, find the equation for the LM curve. Express the LM curve as r(Y). c. Using the IS and LM curves derived in a. and b., determine the equilibrium interest ratee and output.
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Get StartedRecommended Textbook for
Modeling Monetary Economies
Authors: Bruce Champ, Scott Freeman, Joseph Haslag
4th Edition
1316508671, 1316508676, 9781316723302 , 978-1107145221
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