Essay
Assume the following model of the economy, with the price level fixed at 1.0:
C = 0.8(Y - T)
T = 1,000
I = 800 - 20r
G = 1,000
Y = C + I + G
Ms / P = Md / P = 0.4Y - 40r
Ms = 1,200
a.Write a formula for the IS curve, showing Y as a function of r alone.
Correct Answer:
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a.Y = 5,000 - 100r.
b.Y = 3,000 + 100r.
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Correct Answer:
Verified
b.Y = 3,000 + 100r.
...
View Answer
Unlock this answer now
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