Assume that an economy is characterized by the following equations: C = 250 + 0.75(Y - T); T = 100; G = 50 I = 200 - 25r Ms = 1000; P = 2; Md /P = Y - 100r a. Using the Keynesian cross model, find the equilibrium level of Y when r = 6 and graph the results. b. Calculate the IS and LM equations. Use the IS-LM model to find the equilibrium level of r and Y. Graph the results.

Q: 6. Derive the functional form of the IS curve for the following economy: [Hint: Use the equilib-…

A: Given; C=C0+C1(Y-T)G=G¯I=I0-I1(r)T=T¯

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A:

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A: Equilibrium in the market occurs where income is equal to aggregate expenditure.

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A: Here, given information is: Z = C + I + G C = 500 + 0.75YD  T = 600 I = 300 G = 2000 YD = Y − T

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