Suppose an inflationary economy can be described by the

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Suppose an inflationary economy can be described by the following equations representing the goods and money markets: C=20+0.7Yd M=0.4Yd I=70-0.1r T=0.1Y G=100 X=20 Ld=389+0.7Y-0.6r Ls=145 where G represents government expenditure, M is imports, X is exports, Y is national income, Yd is disposable income, T is government taxes(net of transfer payments), I is investment, r is the rate of interest, C is consumption, Ld is money demand, and Ls is money supply.

i) Use the inverse matrix method to solve for equilibrium level of national income and the equlibrium rate of interest in this economy.

ii) Now use Cramers rule to find your answer

Reference no: EM13374904

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