Intermediate Macroeconomic Question. 1.The following equations describe an economy. Y = C + I + G. C = 50+0.75 (Y-T). I = 150 – 10r. (M/P)d = Y – 50r. G = 250 T = 200. M = 3,000. P = 4 a. Identify each of the variables and briefly explain their meaning. b. From the above list, use the relevant set of equations to derive the IS curve. Graph the IS curve on an appropriately labeled graph. c. From the above list, use the relevant set of equations to derive the LM curve. Graph the LM curve on the same graph you used in part (b). d. What are the equilibrium level of income and the equilibrium interest rate? For any 2. Suppose that the money demand function is (M/P )d=800-50r, where r is the interest rate in percent. The money supply M is 2,000 and the price level P is fixed at 5. a. Graph the supply and demand for real money balances. b. What is the equilibrium interest rate?
Intermediate
1.The following equations describe an economy.
Y = C + I + G.
C = 50+0.75 (Y-T).
I = 150 – 10r.
(M/P)d = Y – 50r.
G = 250
T = 200.
M = 3,000.
P = 4
a. Identify each of the variables and briefly explain their meaning.
b. From the above list, use the relevant set of equations to derive the IS curve. Graph the IS curve on an appropriately labeled graph.
c. From the above list, use the relevant set of equations to derive the LM curve. Graph the LM curve on the same graph you used in part (b).
d. What are the equilibrium level of income and the equilibrium interest rate? For any
2. Suppose that the money
where r is the interest rate in percent. The money supply M is 2,000 and the price level P is fixed at 5.
a. Graph the supply and demand for real money balances.
b. What is the equilibrium interest rate?
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