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Assume That an Economy Is Characterized by the Following Equations ISI S

Question 102

Essay

Assume that an economy is characterized by the following equations:
C = 100 + (2/3)(Y - T)
T = 600
G = 500
I = 800 - (50/3)r
Ms/P = Md/P = 0.5Y - 50r

a. Write the numerical ISI S curve for the economy, expressing YY as a numerical function of G,TG , T , and rr .
b. Write the numerical LML M curve for this economy, expressing rr as a function of YY and M/PM / P .
c. Solve for the equilibrium values of YY and rr , assuming P=1.0P = 1.0 and M=1,200M = 1,200 . How do they change when P=2.0P = 2.0 ? Check by computing C,IC , I , and GG .
d. Write the numerical aggregate demand curve for this economy, expressing YY as a function of G,TG , T , and M/PM / P .

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