Consider an IS/LM model of an economy with the following equations
C = 220 + 0.75Yd
I = 165 10i
G bar= 490
TR bar= 300
T = .15Y
L = .2Y 3i
M bar/P bar = 550
(a) Using the above data, derive the equation for the IS curve.
(b) What is the equation for the LM curve?
(c) Calculate the equilibrium level of income and interest rates. Sketch the relevant diagram.
(d) What are the values of the monetary policy multiplier with respect to income and interest rates?
If the money supply is reduced by 50, what are the new market-clearing income and interest rate
levels?
Can you sketch the diagram for part (c) please. Thank you.
Consider an ISLM model of an economy with the following equ.pdf
1. Consider an IS/LM model of an economy with the following equations
C = 220 + 0.75Yd
I = 165 10i
G bar= 490
TR bar= 300
T = .15Y
L = .2Y 3i
M bar/P bar = 550
(a) Using the above data, derive the equation for the IS curve.
(b) What is the equation for the LM curve?
(c) Calculate the equilibrium level of income and interest rates. Sketch the relevant diagram.
(d) What are the values of the monetary policy multiplier with respect to income and interest rates?
If the money supply is reduced by 50, what are the new market-clearing income and interest rate
levels?
Can you sketch the diagram for part (c) please. Thank you
