a) consider the following IS–LM model: C = c1(Y - T) I = b1Y - b2i M/P = d1Y - d2i Solve for equilibrium output. Assume c1 + b1 < 1. b) Solve for the equilibrium interest rate. (Hint: Use the LM relation.) c) Solve for investment.

a) consider the following IS–LM model: C = c1(Y - T) I = b1Y - b2i M/P = d1Y - d2i Solve for equilibrium output. Assume c1 + b1 < 1. b) Solve for the equilibrium interest rate. (Hint: Use the LM relation.) c) Solve for investment.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter9: Aggregate Expenditures

Section: Chapter Questions

Problem 5E

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Question

a) consider the following IS–LM model:

C = c₁(Y - T)

I = b₁Y - b₂i

M/P = d₁Y - d₂i

Solve for equilibrium output. Assume c₁ + b₁ < 1.

b) Solve for the equilibrium interest rate. (Hint: Use the LM relation.)

c) Solve for investment.

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