You are given the following information regarding a hypothetical economy: Consumption function is C= 0.3+0.8(Y-T) Investment I=3.5- 50i G= 3 T= 2.5 The demand for real money is M/P=2+0.2Y-50i. The real stock of money is 3. Answer the following questions: а. Derive the IS Curve b. Derive the LM Curve с. What are the equilibrium equilibrium output and interest rate?
You are given the following information regarding a hypothetical economy: Consumption function is C= 0.3+0.8(Y-T) Investment I=3.5- 50i G= 3 T= 2.5 The demand for real money is M/P=2+0.2Y-50i. The real stock of money is 3. Answer the following questions: а. Derive the IS Curve b. Derive the LM Curve с. What are the equilibrium equilibrium output and interest rate?
Chapter8: The Keynesian Model
Section: Chapter Questions
Problem 9SQP
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