Consider an economy with the following features:Consumption, C = 130 + 0.5 YdIncome tax, T= 20 + 0.2 YInvestment, |= 200 – 60OrGovernment expenditure, G= 112Real money demand, Ma/P= 50 + 0.5 Y – 600rNominal money supply, Ms = 600%3DPrice level, P= 2where Yd stands for disposable income, and r forthe rate of interest.i. Derive the IS and LM equations.ii. Calculate the equilibrium levels of income and rate ofinterest

We have given Consumption function C=130+0.5YD .... (1) Income tax: T=20+0.2Y…

Consider an economy with the following features: Consumption, C = 130 + 0.5Yd Income tax, T= 20 + 0.2 Y Investment, I= 200 – 600r Government expenditure, G= 112 Real money demand, Ma/P= 50 + 0.5 Y – 600r Nominal money supply, Ms = 600 Price level, P= 2 where Yd stands for disposable income, and r for the rate of interest. Derive the IS and LM equations. Calculate the equilibrium levels of income and rate of interest

Consider an economy with the following features: Consumption, C = 130 + 0.5Yd Income tax, T= 20 + 0.2 Y Investment, I= 200 – 600r Government expenditure, G= 112 Real money demand, Ma/P= 50 + 0.5 Y – 600r Nominal money supply, Ms = 600 Price level, P= 2 where Yd stands for disposable income, and r for the rate of interest. Derive the IS and LM equations. Calculate the equilibrium levels of income and rate of interest

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

100%

Consider an economy with the following features:
Consumption, C = 130 + 0.5 Yd
Income tax, T= 20 + 0.2 Y
Investment, |= 200 – 60Or
Government expenditure, G= 112
Real money demand, Ma/P= 50 + 0.5 Y – 600r
Nominal money supply, Ms = 600
%3D
Price level, P= 2
where Yd stands for disposable income, and r for
the rate of interest.
i. Derive the IS and LM equations.
ii. Calculate the equilibrium levels of income and rate of
interest

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