Answer to Question #220153 in Macroeconomics for Yogesh Kumar

Question #220153
Q2
(a) . Given that in an economy
C = 0.8 (1-t) Y
t = 0.25
I = 900 - 50i
1
Expert's answer
2021-07-26T22:34:01-0400

The equilibrium level in the economy is derived from the IS And LM curve equilibrium position.


Y=C+I+GY=C+I+G


Y=0.8(10.25)Y+90050i+800Y=0.8(1−0.25)Y+900−50i+800


Y=0.6Y+170050iY=0.6Y+1700-50i


Y=0.25(170050i)Y=0.25(1700-50i)


Y=4250125iY=4250-125i (for IS curve equilibrium)


For LM curve equilibrium ;


0.25Y62.5i=5000.25Y-62.5i=500


Y=2000+250iY=2000+250i


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