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Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships.

Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships.

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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  1. Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships.

Consider a closed economy where the goods and money markets are described by the following relationships: C = 500+ 0.8(Y – T) - I = 500 10r M P = 0.1Y - 35r G = 800 T = 200 M = 1000 P = 2 Where C is planned consumption, I is planned investment spending, T is government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate.
Transcribed Image Text:Consider a closed economy where the goods and money markets are described by the following relationships: C = 500+ 0.8(Y – T) - I = 500 10r M P = 0.1Y - 35r G = 800 T = 200 M = 1000 P = 2 Where C is planned consumption, I is planned investment spending, T is government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate.
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