What are the simultaneous equilibrium conditions in the money and goods market?
Not what you're looking for?
2(a) Derive the expression for the IS schedule Y = C + I + G in the form i = f(Y), when C = 130 + 0.3Y, I = 100 - 35i, and G = 50.
(b) Calculate the interest rate when the equilibrium level of income is 100 and 300.
(c) Derive the expression for the LM schedule in the form i = f(Y), when the money demand function is Md = 680 + 0.8Y - 20i, and the money supply function is M^S = 880.
(d) Calculate the interest rate when the equilibrium level of income is $500.
(e) Graph the IS and LM curves on the same diagram, showing the intercepts and slope.
(h) Using Cramer's rule, find the level of income and the interest rate for which the money market and the goods market are simultaneously in equilibrium and show them in the diagram. (Answer: Y* = 300, i* = 2.0).
Purchase this Solution
Solution Summary
Cramer's rule is illustrated in this tutorial in an attached Word and Excel file.
Solution Preview
Answer:
(a) We have,
Where,
And,
Adding all we have,
Or,
...
Education
- MBA, Indian Institute of Finance
- Bsc, Madras University
Recent Feedback
- "I've posted a similar question for another course. It's post 657940, and it's a practice problem that I'd like to use for the final exam. Your help will be greatly appreciated. "
- "thank you!"
- "Thank you again Jayant. You are super fast. "
- "Thank you Jayant. You are appreciated. "
- "Again, thank you Jayant. You are wonderful. "
Purchase this Solution
Free BrainMass Quizzes
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.