1. (a) The following equations describe an economy:C-100+ 0.75YdI-50-25rT-G-50Where C is aggregate consumption, Y is disposable income, I is aggregate investment. I istaxes, G is government purchases and r is the rate of interest. Derive the IS curve for theeconomy. Show the area of excess demand and excess supply in the goods market.(b) Draw the graph and explain the derivation of IS curve.2. (a) Given the following data about the monetary sector of the economy:Ma -0.4Y-80rM₁ - 1200 millionWhere, Ma is demand for money, Y is the level of income, r is the rate of interest andM, is the supply of money.Derive the equation for LM curve and give the economic interpretation of this curve.Show the excess demand and excess supply in the money market.(b) Draw the graph and explain the derivation of LM curve.3. Consider the following economy:C-100+ 0.8YdI-50-25,G-T-50M'P-200M₁-Y-25r1. Calculate the IS and LM curves.2. Calculate the equilibrium levels of output (national income) and interest and draw the graph.CS Scanned with CamScanner

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1. (a) The following equations describe an economy: C-100 +0.75Yd 1-50-25r T-G-50 Where C is aggregate consumption, Y is disposable income, I is aggregate investment. I' is taxes, G is government purchases and r is the rate of interest. Derive the IS curve for the economy. Show the area of excess demand and excess supply in the goods market. (b) Draw the graph and explain the derivation of IS curve.

1. (a) The following equations describe an economy: C-100 +0.75Yd 1-50-25r T-G-50 Where C is aggregate consumption, Y is disposable income, I is aggregate investment. I' is taxes, G is government purchases and r is the rate of interest. Derive the IS curve for the economy. Show the area of excess demand and excess supply in the goods market. (b) Draw the graph and explain the derivation of IS curve.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Production And Growth

Section: Chapter Questions

Problem 5CQQ

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