Macroeconomics 12th Edition by Rudiger Dornbusch, Stanley Fischer ,Richard Startz

Exercise 5

The following equations describe an economy. (Think of C , I , G , etc., as being measured in billions and i as a percentage; a 5 percent interest rate implies i = 5.)

a. What is the equation that describes the IS curve
b. What is the general definition of the IS curve
c. What is the equation that describes the LM curve
d. What is the general definition of the LM curve
e. What are the equilibrium levels of income and the interest rate