Assume that an economy is characterized by the following equations: C= 100+ (2/3

Question

Assume that an economy is characterized by the following equations: C= 100+ (2/3)^-7) T= 600 G=500 I= 800-(50/3)r r/P = M/P = 0.5 K- 50r a. Write the numerical IS curve for the economy, expressing Y as a numerical function of G, and r. b. Write the numerical LM curve for this economy, expressing rasa function of Y and MP. c. Solve for the equilibrium values of Yand r, assuming P= 1.0 and M = 1, 200. How do the^change when P = 2.0? Check by computing C, I, and G. d. Write the numerical aggregate demand curve for this economy, expressing Y as a function G, T, and M/P.

Explanation / Answer

Ans:

the numerical IS curve for the economy , expressing Y as a numerical function of G, and r

a. Y = 2,700 + 3G - 2T - 50r.

The Numerical LM curve fro this economy , expressing r as a function of Y and M/P

b. r = 0.01Y - 0.02(M/P).

The equilibrium values of Y and r =

c. For P = 1.0, Y = 2,800

and r = 4;

C = 1,566.67

and I = 733.33.

For P = 2.0, Y = 2,400

and r = 12;     C = 1,300

and I = 600.

The numerical aggregate demand curve for this economy , expressing Y as a function G,T and M/P

d. Y = 1,800 + 2G - (4/3)T + (2/3)M/P.

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