Continue with the same equations indicated as P1, P2….P6 in question 2 above?
1. The following equations describe an economy. (Think of C, I, G, etc., as being measured in billions and i as a
percentage; a 5 percent interest rate implies i= 5.)
C =0.8(1- t)Y (P1) C depends on MPC and disposable income
t = 0.25 (P2) t is the marginal tax rate
I= 900 -50 i (P3) i is the interest rate
G= 800 (P4)
L = 0.25Y- 62.5i (P5)
M/P = 500 (P6)
a . What is the equation that describes the IS curve?
c . What is the equation that describes the LM curve?
PERCUSSION EFFECT ON INCOE
- davidLv 72 months ago
I cannot see question 2 above ...