Unformatted text preview: 1 = Â· 3 âˆ’ 1 âˆ’ 2 1 Â¸ c = Â· 4 2 Â¸ d = Â· 1 2 Â¸ [3] Consider the following macroeconomic model: goods market money market 1 Y = C + I + G 1 M d = kY âˆ’ Î² r 2 C = C + b ( Y âˆ’ T ) 2 M d = M s 3 I = I âˆ’ Î± r 4 T = tY a) Use equations 1 through 4 to f nd an expression for the IS curve ( Y as a function of r ) . Use equations 5 and 6 to f nd an expression for the LM curve ( Y as a function of r ) . b) Graph the IS and the LM with r on the vertical axis and Y on the horizontal axis.(Hint: invert the two equations you derived in a ) c) Write the two equations in matrix form (i.e. Ax = d ) ; where the x vector contains two elements, Y and r. (Hint: A is 2 Ã— 2 ) 1...
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 Spring '09
 KelvinKwainger
 Economics, Macroeconomics, Derivative, Expression

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