Equilibrium-defining equations in an IS-LM model are presented as follows: Y=C+I+G, C = Co + f(Y)...

 

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Equilibrium-defining equations in an IS-LM model are presented as follows: Y=C+I+G, C = Co + f(Y) = g(r), I = Io - h(r), G = Go, and Mo = 3Y - i(r) where Co, Io, Go, Mo> 0 are exogenous variables, and f, g, h, i are continuously differentiable and strictly increasing functions satisfying: Y = Co + f(Y*) - g(r) + Io h(r) + Go 3Yi(r*). Mo for the unique equilibrium (r*,Y*). You should also assume that f' (Y) E (0,1) (Why?). Find dr" /d Mo and dy /d Go, and interpret your results. Equilibrium-defining equations in an IS-LM model are presented as follows: Y=C+I+G, C = Co + f(Y) = g(r), I = Io - h(r), G = Go, and Mo = 3Y - i(r) where Co, Io, Go, Mo> 0 are exogenous variables, and f, g, h, i are continuously differentiable and strictly increasing functions satisfying: Y = Co + f(Y*) - g(r) + Io h(r) + Go 3Yi(r*). Mo for the unique equilibrium (r*,Y*). You should also assume that f' (Y) E (0,1) (Why?). Find dr" /d Mo and dy /d Go, and interpret your results.