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Suppose the economy is described by the following equations: C = 100 + 0.85 (Y - T) - 1000r I = 200 - 2000r, G
Suppose the economy is described by the following equations: C = 100 + 0.85 (Y - T) - 1000r I = 200 - 2000r, G = 500, T = 100 + 0.2Y EX = 35, IM = 50 + 0.08Y L = 20Y - 600000r M = 2200000, P = 110 Where, C stands for consumption, Y for output (or GDP), T for taxes, r for the interest rate, I for investment, G for government purchases, EX for exports, IM for imports, L for money demand, M for money supply, and P for the price level. (a) Find out the equation for the IS and LM curves (40 points) and sketch the corresponding curves (20 points). (b) Find out the equilibrium r and Y (40 points)
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