Consider an economy described by the following set of equations +(Y-T)-ci, C I Md P -...

 

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Consider an economy described by the following set of equations +₁(Y-T)-c₂i, C I Md P - - Go T To MS = Mo. by + b₂Y-b₂i, C₁ - All the parameters (bo, b₁,b₂, Co. C₁, C₂) in this model are strictly positive and b + c < 1. Note that money demand here depends on consumption, not output, as we have seen in class. For simplicity, we assume P = 1 and it does NOT change. Consider an economy described by the following set of equations +₁(Y-T)-c₂i, C I Md P - - Go T To MS = Mo. by + b₂Y-b₂i, C₁ - All the parameters (bo, b₁,b₂, Co. C₁, C₂) in this model are strictly positive and b + c < 1. Note that money demand here depends on consumption, not output, as we have seen in class. For simplicity, we assume P = 1 and it does NOT change.