Question

a)    Consider an economy characterized by the following relationships:

           Consumption:            C = 20 + 0.5(Y - T)

           Investment:                 I = 25 – 200i

           Money Demand:      M_d = Y(0.5 – i)

Answer 1

$Y=C+I; Y=20+0.5Y+25-200i;$

$Y=45+0.5Y-200i;$

$0.5Y=45-200i;$

$Y=90-400i;$