Assume That an Economy Is Characterized by the Following Equations

question 26

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
M^s/P = M^d/P = 0.5Y - 50r
a. Write the numerical IS curve for the economy, expressing Y as a numerical function of G, T, and r.
b. Write the numerical LM curve for this economy, expressing r as a function of Y and M/P.
c.
d. Solve for the equilibrium values of Y and r, assuming P = 1.0 and M = 1,200. How do they change when
P = 2.0? Check by computing C, I, and G.
e. Write the numerical aggregate demand curve for this economy, expressing Y as a function of G, T, and
M/P.

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Definitions:

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