Reference no: EM132587401
INTERMEDIATE MACRO ECONOMIC QUESTION ONE
a) Given the following equations for a certain economy:
Y = C + I + G + X (Income identity)
C =100 +0.9Yd (Consumption function)
I = 200 -500r (Investment function)
X = 100 - 0.12Y -500r (Net export)
G = 200 (Government purchases)
T = 0.2 (Tax rate)
L = Y-100r (Real money demand)
M = 800 (Real money supply)
Required
i) Derive equations for IS and LM curves
ii) Determine the r and y pair at which the two markets are clearing
iii) Compute the values of C, I, X and L
b) What is the difference between the classical and Keynesian supply curve