Suppose Consumption = .6 (Y-T); Investment = 500/r; Real Money Demand = (10Y)/ r; the money...

Suppose Consumption = .6 (Y-T); Investment = 500/r; Real Money Demand = (10Y)/ r; the money supply is 1000 and the Price Level is 2. Let G=T=0.

a. Find the equation for the IS curve.

b.Find the equation for the LM curve.

c. What are the equilibrium values of Y and r?

d. Suppose the Fed increases the money supply to 2000. Find the new equilibrium values of Y and r.

Expert Solution

Rahul Sunny answered 2 years ago

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