Q8Determine the equilibrium income Y and interest rate r, given the following informationabout the commodity market:C = 0.6Y + 60I = -40r + 1300where C and I denote consumption and planned investment, respectively, and the follow-ing information about the money market:M5 = 600L, = 0.2YL2 = - 30r + 40%3D%3Dwhere Ms, L1 and L2 denote money supply, transaction-precautionary demand for moneyand speculative demand for money, respectively.The marginal propensity to consume decreases. By producing a rough sketch of the ISand LM curves on the same diagram, explain whether the equilibrium values of Y and rwill increase, decrease or stay the same.

Definition: Short-run competitive equilibrium is a circumstance where, given the organizations on…

Q8 Determine the equilibrium income Y and interest rate r, given the following information about the commodity market: C = 0.6Y + 60 1 = -40r + 1300 where C and I denote consumption and planned investment, respectively, and the follow- ing information about the money market: M = 600 L, = 0.2Y L2 = -30r + 40

Q8 Determine the equilibrium income Y and interest rate r, given the following information about the commodity market: C = 0.6Y + 60 1 = -40r + 1300 where C and I denote consumption and planned investment, respectively, and the follow- ing information about the money market: M = 600 L, = 0.2Y L2 = -30r + 40

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 2TY

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