Suppose that the following equations describe an economy, Ask an Expert

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Suppose that the following equations describe an economy, where C, I, G, T, and Y are measured in billions of dollars, and r is measured in percent (i.e. r=10 means r=10%). C = 170 + 0.6(Y-T) T = 200 I = 100 – 4r G = 350 Money demand L = 0.75Y – 6r Money supply Ms = 735

(a) Derive the equation for the IS curve

(b) Derive the equation for the LM curve.

(d) Calculate the equilibrium level of real output Y, the interest rate r, planned investment I, and consumption C.

(e) At the equilibrium level of output Y, calculate the value of government budget surplus/deficit.

(f) Suppose that G increases by 36 to 386. Derive the new IS and LM equations and plot these curves as in (c).

(g) Calculate the new equilibrium.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91824025

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