Consider the following numerical version of the IS-LM model:

Question

C = 60 + 0.6Yd
I = 150 – 10i
YD = Y – T
T = 200
G = 250
Real money demand: (M/P)d = (40 + 0.1 Y – 10i)P
Real money supply (M/P)s = 80
P = 2
Where

Y is output, Yd is disposable income, C is consumption, I is investment, i is the interest rate, G is government expenditure, T is tax, P is the price level.

c) From the above information, find the equation for the IS curve in terms of Y, and the LM curve in terms of Y.

(d) Solve for the equilibrium interest rate and level of income.
(e) Solve for the equilibrium values of consumption and investment spending and use the results to verify that they are consistent with the level of income calculated in (d) above.

(f) If the government increases expenditure by 40 to 290, solve again for equilibrium levels of Y, i, C and I.

(g) Using diagrams, explain how the results of your calculation in (f) above of interest rates and output are consistent with the predictions of IS-LM theory.

I UNDERSTAND THAT I MAY HAVE ASKED TOO MUCH BUT I WOULD BE REALLY GLAD IF YOU COULD HELP ME ANSWER EVEN A FEW OF THOSE QUESTIONS. RESPONSES ARE APPRECIATED. THANKS IN ADVANCE.

Answer 1

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Answer 2

i have just come across this website i am not familiar with it thanks for the advice

Answer 3

can you help me with this?

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