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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?

Update 2:


1 Answer

  • david
    Lv 7
    2 months ago

    I cannot see question 2 above ...  

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