Suppose the world real interest rate r ∗ = 3, inflation expectation π e = 2, money supply is 1000, price level is 2. The money demand function is L(i, Y ) = Y − 50i. Suppose the consumption function is: C=200+0.75*(Y-T), I=200-25r, the government spending (G) and tax (T) are both 120, the net export is NX = 100 − 50e. 1. Solve the IS* curve and the LM* curve. 2. Solve Y and e.

Suppose the world real interest rate r ∗ = 3, inflation expectation π e = 2, money supply is 1000, price level is 2. The money demand function is L(i, Y ) = Y − 50i. Suppose the consumption function is: C=200+0.75(Y-T), I=200-25r, the government spending (G) and tax (T) are both 120, the net export is NX = 100 − 50e. 1. Solve the IS curve and the LM* curve. 2. Solve Y and e.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter26: Monetary Policy

Section: Chapter Questions

Problem 11SQP

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