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Unformatted text preview: Economics 100B UCSC Professor K. Kletzer Fall 2008 Problem Set 2 Due at the beginning of lecture, Friday, October 17 1. Consider the following IS-LM model: C = 1200 + 0.9 Yd I = 0.2 Y – 20,000 i G = 2000 T = (1/3) Y (M/P)d = Y – 100,000 i M/P = 6000 (a) Derive the equation for the IS curve (it will be easiest if you write this with Y on the left-hand side and all else on the right-hand side). (b) Derive the equation for the LM curve (again, put Y on the left-hand side). (c) Solve for the equilibrium interest rate (note tha...
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