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C = 1275 + 0.5(Y-T) – 200r

I = 900 – 200r

Real Money demand, L = 0.5Y – 200i

Expected inflation, ? = 0

Full employment output, = 4600

a.) Suppose that T = G = 450 and M = 9000

Find an equation describing the IS curve

Find an equation describing the LM curve

Find an equation for the aggregate demand curve (Hint: Use IS and LM equations to find a relationship between Y and P)

What are the general equilibrium values of output, consumption, investment, real interest rate, and price level?

b) Suppose M = 4500, T and G remain the same.

What is the equation for the aggregate demand curve?

What are the general equilibrium values of output, consumption, investment, real interest rate, and price level?

c.) Suppose T = G = 330 and M = 9000

What is the equation for the aggregate demand curve?

What are the general equilibrium values of output, consumption, investment, real interest rate, and price level?

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Namita kumari
Namita kumariLv6
28 Sep 2019

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