Suppose that the following equations describe an economy:

C = 170 + 0.60YD

M^s = 735; P = 1

T = 200

I = 100 - 4i

Md = 0.75Y - 6i

G = 350

a) what is the equation for equilibrium in the goods market?

b) What is the equation for equilibrium in the financial markets?

c) What are the equilibrium level of output (Y), the interest rate (i), investment (I) and consumption (C)?

d) Suppose that the Bank of Canada sought to achieve the equilibrium level of output Y = 1140 through expansionary monetary policy alone. By how much would the Bank of Canada have to increase the money supply?

e) Suppose that G increases by 36 to 386. What will be the new IS curve?

Answer rating: 100% (QA)

Lets analyze the given information step by step a Equilibrium in the Goods Market In the goods market equilibrium occurs when the total output Y is eq... View the full answer