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    IS / LM Analysis

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    A macroeconomic model of Econoland can be summarized as follows:

    C = 100 + 0.5(Y - T)
    I = 0.25 Y - 500(r)
    G0 = 300
    T0 = 100
    X0 = 200
    M0 = 200
    M D = 10Y - 20,000(r)
    M S0 = 200

    Part a - Derive the equation for the IS Schedule
    Part b - Derive the equation for the LM Schedule
    Part c - Calculate the equilibrium interest rate (r)
    Part d - Calculate the equilibrium level of income (Y)

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    https://brainmass.com/economics/general-equilibrium/is-lm-analysis-18682

    Solution Preview

    Part a - Derive the equation for the IS Schedule
    The IS Equation
    Y = C + I + G + (X - M)
    Y = 100 + 0.5(Y - 100) + 0.25 Y - 500(r) + 300 + (200 - 200)
    Y = 350 + 0.75Y - 500(r)
    0.25 Y = ...

    Solution Summary

    IS / LM Analysis is achieved.

    $2.49

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