question archive (2 points) Consider the following numerical example of the IS-LM model a
(2 points) Consider the following numerical example of the IS-LM model a
Subject:BusinessPrice: Bought3
(2 points) Consider the following numerical example of the IS-LM model
a.
C = 100 + 0.3YD
I = 150 + 0.2Y - 1000i
T = 100
G = 200
Find the equation for equilibrium output (Y), i.e. Y = C+I+G. Remember that YD=Y-T. Then, turn the equation into the relations between Y and i, which is IS relations.
b. If real money supply is (M/P)s = 1200, and real money demand is (M/P)d = 2Y - 4000i, solve for equilibrium output Y in terms of i, by setting real money supply equal to real money demand. Assume that this level of i is the interest rate of LM relations set by the central bank.
c. (extra 1 point) Set IS relations (Y in terms of i) in a, equal to Y in terms of i in b, and find the equilibrium i. Then substitute i in one of the relations to find equilibrium amount of Y, where both IS and LM relations are satisfied.
