Consider the following short-run closed economy IS-LM model described by equations (1) through (6): (1) C...
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Consider the following short-run closed economy IS-LM model described by equations (1) through (6): (1) C = 500 + 0.75(Y – T); (2) T = 120+0.2Y;(3) G = 1300; (4) 1 =900 - 40 r ; (5) Y = C+ I + G; (6) M/P = 0.5Y - 50r where the nominal money supply M=2000. Equation (5) is the goods market equilibrium condition (IS equation), while equation (6) is the money market equilibrium condition (LM equation). Suppose that the price level Pis not given. Then the aggregate demand equation for this model is: a) Y=2250.5 + 1000/P b) 6552.5 + 4000/P c) Y= 4270 + 3000/P d) Y= 3262.5 + 2000/P Consider the following short-run closed economy IS-LM model described by equations (1) through (6): (1) C = 500 + 0.75(Y – T); (2) T = 120+0.2Y;(3) G = 1300; (4) 1 =900 - 40 r ; (5) Y = C+ I + G; (6) M/P = 0.5Y - 50r where the nominal money supply M=2000. Equation (5) is the goods market equilibrium condition (IS equation), while equation (6) is the money market equilibrium condition (LM equation). Suppose that the price level Pis not given. Then the aggregate demand equation for this model is: a) Y=2250.5 + 1000/P b) 6552.5 + 4000/P c) Y= 4270 + 3000/P d) Y= 3262.5 + 2000/P
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