1. Consider a simple economy described by: A = C + I + G + X...

Question

Question

1. Consider a simple economy described by:

A = C + I + G + X - M

C = 500 + 0.5Y – 200i

I = 14000 + 0.2Y– 200i

G = 1200 - 0.1Y

X = 2000

M= 1000 -.05Y

Y = A

L = 0.33Y – 25i

(M/P) = 3000

L = (M/P)

e. If the government increases spending G by 100:

i. What would the new IS Curve look like?

ii. What would the new LM curve look like?

iii. What would the new equilibrium income Y and Interest I be?

iv. At this new equilibrium, what would the level of Investment spending be?

business economics

Answer 1

Answer #1

Answer 2

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