3. Assume that an economy is characterized by the followingequations: C = 100 + (2/3)(Y T)...
Question:
3. Assume that an economy is characterized by the followingequations: C = 100 + (2/3)(Y – T) T = 600 G = 500 I = 800 – (50/3)rMs /P = Md /P = 0.5Y – 50r
a. Write the numerical IS curve for the economy, expressing Y asa numerical function of G, T, and r.
I am not clear on how to get to the below solution:
Y= 2,700+3G-2T-50r
b. Write the numerical LM curve for this economy, expressingr as a function of Y and M/P.
r=0.01Y-0.2(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 bycomputing C, I, and G.
P = 1.0; Y=2,800; r=4; C=1,566.67; I = 733.33
P = 2.0; Y = 2,400; r=12; C=1,300; I =600
I have not been able to get the value of G
d. Write the numerical aggregate demand curve for thiseconomy, expressing Y as a function of G, T, and M/P.
Y=1,800+2G-(4/3)T+(2/3)M/P
College Mathematics for Business Economics Life Sciences and Social Sciences
ISBN: 978-0321614001
12th edition
Authors: Raymond A. Barnett, Michael R. Ziegler, Karl E. Byleen