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Unformatted text preview: 1 = 3 1 2 1 c = 4 2 d = 1 2  Consider the following macroeconomic model: goods market money market 1 Y = C + I + G 1 M d = kY r 2 C = C + b ( Y T ) 2 M d = M s 3 I = I 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 2 ) 1...
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This note was uploaded on 09/13/2009 for the course EOCNOMICS Econ 331 taught by Professor Kelvinkwainger during the Spring '09 term at Simon Fraser.
- Spring '09