For the Commodity Market C = AY + B and I

question 7

Multiple Choice

For the commodity market C = aY + b and I = cr + d
For the money market MS = MS* and MD = k1Y + k2r + k3
If both markets are in equilibrium, find the matrix A such that Ax = b where $\mathbf { x } = \left[ \begin{array} { l } \boldsymbol { r } \\\bar { Y }\end{array} \right] \text { and } \mathbf { b } = \left[ \begin{array} { c } M _ { S } { } ^ { * } - k _ { 3 } \\b + d\end{array} \right]$

• A) \(\left[\begin{array}{ccc}
• k_{2} & & k_{1} \\
• -c & 1 & -a
• \end{array}\right]\)
• B) \(\left[ \begin{array} { l l } a - 1 & - c \\ k _ { 1 } & k _ { 2 } \end{array} \right]\)
• C) \(\left[ \begin{array} { l l } 1 - a & - c \\ k _ { 1 } & k _ { 2 } \end{array} \right]\)
• D) \(\left[ \begin{array} { l r } a - 1 & c \\ k _ { 1 } & k _ { 2 } \end{array} \right]\)
• E) \(\left[ \begin{array} { l r } k _ { 2 } & k _ { 1 } \\ c & a - 1 \end{array} \right]\)

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Definitions:

Cash

The most liquid form of assets, representing currency or assets that can be immediately turned into currency.

Prepaid Expense

An expense that is paid for in advance and recorded as an asset until it is actually incurred.

Double-Entry Bookkeeping

An accounting system in which the recording of each transaction affects two or more accounts and the total of the debits is equal to the total of the credits.

Debiting

The process of recording an entry on the left side of the accounting ledger, which increases asset or expense accounts and decreases liability, equity, or revenue accounts.