A 9R, where 1-b 1-b Question Two Consider the IS-LM Model. Let the IS equation be Y = (1b) is the marginal propensity to save, g is the investment sensitivity to interest rates, and A is an aggregate of exogenous variables. Let the LM equation be Y = +=R, where k and 1 are income and interest sensitivity of money demand, and Mo is real money balances. Mo k k It is given b = 0.7, g = 100, A = 252, k = 0.25, l = 200, and Mo 176. a) Utilize the given numbers to substitute the variables in the model, and then write down the IS-LM equation system in matrices form. b) Solve for the equilibrium values of Y and R using Cramer's Rule. (Note: Keep 2 digits after the decimal point.)
A 9R, where 1-b 1-b Question Two Consider the IS-LM Model. Let the IS equation be Y = (1b) is the marginal propensity to save, g is the investment sensitivity to interest rates, and A is an aggregate of exogenous variables. Let the LM equation be Y = +=R, where k and 1 are income and interest sensitivity of money demand, and Mo is real money balances. Mo k k It is given b = 0.7, g = 100, A = 252, k = 0.25, l = 200, and Mo 176. a) Utilize the given numbers to substitute the variables in the model, and then write down the IS-LM equation system in matrices form. b) Solve for the equilibrium values of Y and R using Cramer's Rule. (Note: Keep 2 digits after the decimal point.)
Chapter17: Capital And Time
Section: Chapter Questions
Problem 17.9P: Precautionary saving and prudence The Query to Example 17.2 asks how uncertainty about the future...
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Transcribed Image Text:A
9R, where
1-b 1-b
Question Two Consider the IS-LM Model. Let the IS equation be Y =
(1b) is the marginal propensity to save, g is the investment sensitivity to interest rates,
and A is an aggregate of exogenous variables. Let the LM equation be Y = +=R, where
k and 1 are income and interest sensitivity of money demand, and Mo is real money balances.
Mo
k k
It is given b
=
0.7, g = 100, A = 252, k = 0.25, l = 200, and Mo 176.
a) Utilize the given numbers to substitute the variables in the model, and then write
down the IS-LM equation system in matrices form.
b) Solve for the equilibrium values of Y and R using Cramer's Rule.
(Note: Keep 2 digits after the decimal point.)
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