(A) Given: C = 100 + 0.75Yd (where Yd = Y-T) I = 120-600i G = 200 T = 20 + 0.2Y Ms/P = 300 Md/P = 50+0.5Y-600i Where: C = Consumption Y = Income I = Investment G = Government spending T = Taxes i = interest rate Ms/P = RealMoney Supply Md/P = Real Demand for Money (a) Derive the IS and LM curves (b) Obtain the equilibrium: i. Interest rate ii. Income and consumption
(A) Given: C = 100 + 0.75Yd (where Yd = Y-T) I = 120-600i G = 200 T = 20 + 0.2Y Ms/P = 300 Md/P = 50+0.5Y-600i Where: C = Consumption Y = Income I = Investment G = Government spending T = Taxes i = interest rate Ms/P = RealMoney Supply Md/P = Real Demand for Money (a) Derive the IS and LM curves (b) Obtain the equilibrium: i. Interest rate ii. Income and consumption
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
(A) Given: C = 100 + 0.75Yd (where Yd = Y-T)
I = 120-600i
G = 200
T = 20 + 0.2Y
Ms/P = 300
Md/P = 50+0.5Y-600i
Where: C = Consumption
Y = Income
I = Investment
G = Government spending
T = Taxes
i = interest rate
Ms/P = RealMoney Supply
Md/P = Real Demand for Money
(a) Derive the IS and LM curves
(b) Obtain the equilibrium:
i. Interest rate
ii. Income and consumption
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