Question 1 Assume a simple two sector model where Y = C + IC = a...

Question 1

Assume a simple two sector model where Y = C + IC = a + bY and I = I_o. Assume in addition, that a = 85, b = 0.45 and I_o =55. Calculate the equilibrium level of income.
Assume that:

C =178+0.6Y

I = 240 – 300i

M_S = 550

M_DT = 0.2Y

M_DS = 480 – 500i

Determine the market equilibrium

State and explain any “Two factors” that cause the shifts in the balance of payments curve.

Expert Solution

Rahul Sunny answered 2 years ago

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