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)

Answer rating: 100% (QA)

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 total ... View the full answer