Question
Suppose the demand in money in million is L=0.2Y1,the money supply in millions is KSH200,and for a three sector model consumption C-KSH(90+0.80Yd)m, Tax tx=KSH50m and
Suppose the demand in money in million is L=0.2Y1,the money supply in millions is KSH200,and for a three sector model consumption C-KSH(90+0.80Yd)m, Tax tx=KSH50m and investment I=KSH(140-5i)m and government expenditure G=50m 1-Derive the IS and LM equation 2-From IS and LM equation derive in 1)above find the equilibrium output rate of interest and investment 3-Derive the IS equation when government spending increases to KSH 20million ceteris peribus 4-Find the equilibrium output ,rate of interest and investment when government spending increases as mentioned in (3) above
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