Solve for the equilibrium interest rate

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Reference no: EM131001903

Consider the following IS-LM model: C = 200 + .30 YD

I = 150 + .30 Y – 1000i

G = 200

T = 200 (M/P)d = 2Y – 8,000i

M/P = 1600

(a) Derive the IS equation. (Y = …) (b) Derive the LM equation (Write this as i = …) (c) Solve for equilibrium output (Y). (d) Solve for the equilibrium interest rate. (e) Solve for the values of C, I, and G at equilibrium. (f) Next, allow the real money supply to increase to 1800. Solve for the new equilibrium values of output, the interest rate, C, I, and G.

Reference no: EM131001903

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