In: Economics
expenditure sector: money sector:
AD = C + I + G + NX Ms = 500
C = 110 + (2/3)YD P = 1
YD = Y - TA + TR md = (1/2)Y + 400 - 20i
TA = (1/4)Y + 20
TR = 80
I = 250 - 5i
G = 130
NX = -30
Solution:
a.)
From Y=AD ==>
IS-curve
From
From IS = LM
b)
If government purchases are increased by , the IS-curve will shift by
,
and the new IS-curve is of the form Y=1200-10i
Therefore, fro IS1=LM
Check: I1 = 250-5*20=150
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