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the following set of equations describe a hypothetical closed economy with government and central bank: C=200+0.25Y D I=150+0.25Y- 1000i G=250 T=200 M D = 2Y-8000
the following set of equations describe a hypothetical closed economy with government and central bank:
C=200+0.25Y D
I=150+0.25Y- 1000i
G=250
T=200
MD= 2Y-8000i
Ms=1600
Where C is the consumption, YD is the real GDP, I is the investment, G is the government expenditure, T is the lump-sum tax, i is the interest rate, MD is the (real) money demand, and MS is the (real) money supply.
a. in the money market equilibrium, money demand, is equal to money supply. that is MD=MS. from this derive Y as a function of i.
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