Assume an economy is characterised by the following equations: c=200+.8(y-t), I=400-20r, (M/P)^d=Y-100r,?

M=4000
P=2
G=300
T=200
What is the equations for the IS and LM curves? Wat are the equilibrium levels of output and interest rate?
LM=(M/P)
IS=200+.8(y-t)+400-20r

Answer:
Y=3700-100r (IS equation)
r=(Y/100)-40 (LM equation)

I tried to calculate everything, but the numbers didn't look right.

1. To get the IS equation. Y=C+I+G.
2. To get the LM equation. set (M/P)^d=(M/P)^s
3. To get Equilibrium output of Y. Plug the LM equation into the IS equation
4. To get the Interest rate. Plug Equilibrium out put of Y into the LM equation.

The answers post by the user, for information only, FunQA.com does not guarantee the right.



More Questions and Answers:
  • Should all the money going to oil and coal energy by the government go instead towards green energy?
  • The difference between ~govt budget deficit ~current account deficit~balance-of-trade deficit?
  • What is the difference between the chinese and us economies?
  • Multiplier and equilibrium output calculation problem?
  • Gravity model in international trade?
  • How to avoid getting robbed by the exchange rate?
  • What is scarcity and how is it different from shortage?
  • How should the central bank of Ireland react to the current financial situation in the country?
  • Australia‚Äôs current economic state?
  • Is the United State's trade Embargo hurting US Oil companies' exploration and drilling of Gulf Oil ?