2. Consider the following IS-LM model for a two- sector economy. Y = C + IC = \alpha + \beta YI = \gamma + \delta i Md = Ms Md MO L1 + L2 = \lambda Y + \sigma + \mu i Ms Where Y, C, I and i are endogenous variables and Mo is exogenously determined. a. Express the model in matrix form. b. Using matrix algebra, find the expression for the equilibrium values of Y and i. c. If \alpha = 97, \beta = 0.7, \gamma 180, \ delta = -125, \lambda 0.2, \sigma 220, \mu = - 175 and Mo = 255, verify the equilibrium values of Y and i. = = = = =

2. Consider the following IS-LM model for a two- sector economy. Y = C + IC = \alpha + \beta YI = \gamma + \delta i Md = Ms Md MO L1 + L2 = \lambda Y + \sigma + \mu i Ms Where Y, C, I and i are endogenous variables and Mo is exogenously determined. a. Express the model in matrix form. b. Using matrix algebra, find the expression for the equilibrium values of Y and i. c. If \alpha = 97, \beta = 0.7, \gamma 180, \ delta = -125, \lambda 0.2, \sigma 220, \mu = - 175 and Mo = 255, verify the equilibrium values of Y and i. = = = = =

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

2. Consider the following IS-LM model for a two- sector economy.
\gamma + \delta i Md =
\lambda Y + \sigma + \mu i Ms = M0
Y = C + IC = \alpha + \beta YI
Ms Md L1 + L2 =
=
Where Y, C, I and i are endogenous variables and Mo is
exogenously determined. a. Express the model in matrix form. b.
Using matrix algebra, find the expression for the equilibrium values
of Y and i. c. If \alpha
= 97, \beta
0.7, \gamma
180, \
delta = 125, \lambda = 0.2, \sigma
220, \mu
- 175 and
Mo = 255, verify the equilibrium values of Y and i.
=
=
=
=
=

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