a.Derive the IS relation. (Hint: You want an equation with Y on the left hand side and everything else on the right.) o. Solve for Y, given that the central bank has set nterest rate at 5% (Use 05 in the eauation )

a.Derive the IS relation. (Hint: You want an equation with Y on the left hand side and everything else on the right.) o. Solve for Y, given that the central bank has set nterest rate at 5% (Use 05 in the eauation )

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

Consider the following numerical example of the
IS-LM model.
C = 300 + 0.5(Y – T) – 1000i
| = 150 + 0.2Y – 3000i
G = 400
T = 100 + .2Y
i = .05
(M/P)d= 2Y – 8000i
a.Derive the IS relation. (Hint: You want an
equation with Y on the left hand side and
everything else on the right.)
b. Solve for Y, given that the central bank has set
interest rate at 5%. (Use .05 in the equation.)

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