Consider a closed economy where the goods and money markets are described by the following relationships:C = 200 + 0.9(Y – T)1 = 400 – 15rM= 200 + Y – 100rG = 150T = 100M = 2000P = 2Where Cis planned consumption, / is planned investment spending, Tis government tax revenues, G isgovernment purchases, M is the money supply, P is the price level and r is the interest rate.Department of Economicsa) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the tworelationships.b) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point).Compute also the level of consumption and investment spending in equilibrium and check whether the actuallevel of spending matches the equilibrium level of output.

Given C = 200+0.9(Y-T) .... (1) I=400-15r…

Consider a closed economy where the goods and money markets are described by the following relationships: C = 200 + 0.9(Y – T) | = 400 – 15r M 200 +Y- 100r P G = 150 T = 100 M = 2000 P = 2 Where Cis planned consumption, / is planned investment spending, Tis government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. Department of Economics ) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships. ) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). Compute also the level of consumption and investment spending in equilibrium and check whether the actual level of spending matches the equilibrium level of output.

Consider a closed economy where the goods and money markets are described by the following relationships: C = 200 + 0.9(Y – T) | = 400 – 15r M 200 +Y- 100r P G = 150 T = 100 M = 2000 P = 2 Where Cis planned consumption, / is planned investment spending, Tis government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. Department of Economics ) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships. ) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). Compute also the level of consumption and investment spending in equilibrium and check whether the actual level of spending matches the equilibrium level of output.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

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