Consider a closed economy where the goods and money markets are described by the following relationships:C = 200 + 0.9(Y – T)1 = 400 – 15rM= 200 + Y – 100rG = 150T = 100M = 2000P = 2Where Cis planned consumption, / is planned investment spending, Tis government tax revenues, G isgovernment purchases, M is the money supply, P is the price level and r is the interest rate.Department of Economicsa) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the tworelationships.b) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point).Compute also the level of consumption and investment spending in equilibrium and check whether the actuallevel of spending matches the equilibrium level of output.

Given C = 200+0.9(Y-T) .... (1) I=400-15r…

Consider a closed economy where the goods and money markets are described by the following relationships: C = 200 + 0.9(Y – T) | = 400 – 15r M 200 +Y- 100r P G = 150 T = 100 M = 2000 P = 2 Where Cis planned consumption, / is planned investment spending, Tis government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. Department of Economics ) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships. ) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). Compute also the level of consumption and investment spending in equilibrium and check whether the actual level of spending matches the equilibrium level of output.

Consider a closed economy where the goods and money markets are described by the following relationships: C = 200 + 0.9(Y – T) | = 400 – 15r M 200 +Y- 100r P G = 150 T = 100 M = 2000 P = 2 Where Cis planned consumption, / is planned investment spending, Tis government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. Department of Economics ) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships. ) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). Compute also the level of consumption and investment spending in equilibrium and check whether the actual level of spending matches the equilibrium level of output.

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Chapter1: Making Economics Decisions

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Question

Consider a closed economy where the goods and money markets are described by the following relationships:
C = 200 + 0.9(Y – T)
1 = 400 – 15r
M
= 200 + Y – 100r
G = 150
T = 100
M = 2000
P = 2
Where Cis planned consumption, / is planned investment spending, Tis government tax revenues, G is
government purchases, M is the money supply, P is the price level and r is the interest rate.
Department of Economics
a) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two
relationships.
b) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point).
Compute also the level of consumption and investment spending in equilibrium and check whether the actual
level of spending matches the equilibrium level of output.

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