Question: 1. The IS-LM model is a macroeconomic model relating equilibrium in the goods and asset markets. The two endogenous variables are output (Y) and real

1. The IS-LM model is a macroeconomic model relating equilibrium in the goods and asset markets. The two endogenous variables are output (Y) and real interest rates (r). An economy has the following reduced form IS and LM curves:

0.3Y+100r=252

0.25Y200r=176

0.3Y+100r=2520.25Y200r=176

a. Express this system in matrix form such thatAX=B

AX=B, where A is the coefficient matrix, X is the variable vector, and B is the solution vector.

b. Use Cramer's rule to solve for the equilibrium values of Y and r.

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