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Microeconomic Theory

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter2: Mathematics For Microeconomics

Section: Chapter Questions

Problem 2.4P

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Please no written by hand and no emage

If given the following information (Unit: RM million):
Consumptions (C) = 500+ 0.85Yd
Government expenditure (G) = 250
Taxes (T) = 50+ 0.1Y
Investment (I) = 500 - 150r
Money supply (M³) = 6000
Transaction money demand
Speculative money demand
Price level (P) = 3
0.3Y
= 500-300r
(a) Derive the functions of IS and LM in terms of interest rate (r) and income (Y).
(b) Calculate the slope of the IS and LM curves.
(c) Determine the equilibrium of interest rate and aggregate output in the economy.
(d) If autonomous money decreases to RM400 million,
i. Calculate the new level of economic equilibrium.
ii. Sketch the economic changes that took place before and after the decrease autonomous money
and explain.
Please sketch the graph with explanation

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