Concept explainers
IS-LM Model in Economics In economics, the curve is a linear equation that represents all combinations of income and interest rates that maintain an equilibrium in the market for goods in the economy. The curve is a linear equation that represents all combinations of income and interest rates that maintain an equilibrium in the market for money in the economy. In an economy, suppose that the equilibrium level of income (in millions of dollars) and interest rates satisfy the system of equations
Find the equilibrium level of income and interest rates.
To find: In economics, the IS curve is a linear equation that represents all combinations of income Y and interest rates r that maintain an equilibrium in the market for goods in the economy. The LM curve is a linear equation that represents all combinations of income Y and interest rates r that maintain an equilibrium in the market for money in the economy. Ibn an economy, suppose that the equilibrium level of income (in millions of dollars) and interest rates satisfy the system of equations,
Find the equilibrium level of income and interest rates.
Answer to Problem 72AYU
The equilibrium level of income is 1200 and interest rates .
Explanation of Solution
Given:
Calculation:
-----1
-----2
Subtracting equation 1 and equation 2 we have,
Using the value of to find using equation 1 we have,
-----1
Chapter 11 Solutions
Precalculus
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