Question

Md=25y-80r,Ms=2400, p=2

a)       Find equilibrium output equation. And Y* when r=12%

b)     Find LM curve equation

c)      Find slope of LM curve.

d)     MS increased to 3000

3. Find equilibrium r

4. Find equilibrium y

Answer 1

a) $25\cdot y – 80\cdot 0. 12 = 2400$

y = 95.6

b) r = (1/L ₂) [L ₀ + L ₁Y – M/P]

d) $25\cdot y – 80\cdot 0.12 = 3000$

y = 119.6

3) 0.12

4) y = 95.6