Assume That an Economy Is Characterized by the Following Equations

question 12

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 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.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.
d.Write the numerical aggregate demand curve for this economy, expressing Y as a function of G, T, and M/P.

---

Definitions:

Mutually Exclusive

refers to events that cannot occur at the same time in a probabilistic experiment.

P(A)

The probability of an event A occurring.

P(B)

Represents the probability of an event B occurring in probability theory and statistics.

Classical Approach

A method or theory in economics and political philosophy centered around free markets, competition, and limited government intervention.