C=100+0.8Y, I=150-6r, G= 100,7 = 0.25Y, M = 0.2Y-2r, M = 300, P=2, Where C- consumption, I- investment, r- interest rate, y-disposable income, T-tax, G- government expenditure, M-money demand, M-nominal money supply and P-price. Find; ii. If the economy opens up: X=100, M = 20+0.1 where X-imports and M- imports find new equilibrium income level. (6 marks) iii. Find the

C=100+0.8Y", I=150-6r, G= 100,7 = 0.25Y, M" = 0.2Y-2r, M = 300, P=2, Where C- consumption, I- investment, r- interest rate, y-disposable income, T-tax, G- government expenditure, M"-money demand, M-nominal money supply and P-price. Find;
ii. If the economy opens up: X=100, M = 20+0.1 where X-imports and M- imports find new equilibrium income level.
(6 marks)
iii. Find the direction and magnitude of shift in LM curve if nominal money supply is doubled and in IS curve when G increases from 100 to 400.
(8 marks)
iv. How is your answer in part (i) affected if price is also doubled along with nominal money supply?
(6 marks)

Expert Answer

The detailed answer for the above question is provided below: i. To find the equilibrium income level, we need to equate the total output (Y) to the t View the full answer