If given the following information (Unit: RM million): Consumptions (C)=500+ 0.85Y₁ 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.
If given the following information (Unit: RM million): Consumptions (C)=500+ 0.85Y₁ 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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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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