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Calculate the equilibrium level of national income

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(a) Calculate the equilibrium level of national income and the equilibrium interest rate given the following information on the goods and money markets:

Goods market: C = 40 + 0.6Yd

I = 200 - 20r G0 = 400 t= 0.2

Money market: L1 = 0.2Y

L2 = 60 - 120 r

M0 = 200

where Md = L1 + L2 and Ms = M0

(b) Calculate the effect on the equilibrium level of national income and the interest rate when money supply increases to $450m.

Reference no: EM132548755

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