# Consider an open economy at full employment with the factors described by the following relationships: C=0.9Yd+100 I=600-2000i

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## Question:

Consider an open economy at full employment with the factors described by the following relationships:

C=0.9Yd+100

I=600-2000i

G=600

T=1000

X=200

MS=0.1Y

M=550

Lm=0.25Y-1500i

where Y is the level of production, C is consumption, Yd is disposable income, i is the interest rate, T is taxes, I is investment, G is public spending, X is exports, M is imports, Lm is the demand for money, MS is the supply of money.

Prices and wages are rigid

Questions :

1) Determine and represent the simultaneous equilibrium on the B/S market and the financial market?

2) Determine the level of investment in this economy, and specify how it is financed?

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