Question #96190
Goods Market Money Market
C = 250 + 0.8YD L = 0.25Y – 62.5i
YD = Y + TR – T Ms/P = 250
T = 100 + 0.25Y
I = 300 – 50i
G = 350; TR = 150
Goods market equilibrium condition: Y = C + I + G + X-M
Money market equilibrium condition: L = Ms/P
a) What is the equation that describes the IS curve (YIS)?
C = 250 + 0.8YD L = 0.25Y – 62.5i
YD = Y + TR – T Ms/P = 250
T = 100 + 0.25Y
I = 300 – 50i
G = 350; TR = 150
Goods market equilibrium condition: Y = C + I + G + X-M
Money market equilibrium condition: L = Ms/P
a) What is the equation that describes the IS curve (YIS)?
Expert's answer
a) The equation that describes the IS curve (YIS) is:
Y = C + I + G = 250 + 0.8(Y + TR – T) + 300 – 50i + 350 = 900 + 0.8(Y + TR – T) – 50i.
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Endogenous Variables: C, YD T, I, X, IM, L, Ms, CF, NX, Y, i and .RES/P Exogenous Variables: Co, To, Io, Go, TRo, Xo, Yf, IMo, Mo, CFo, NXo, i, if and P Parameters: c, t, b, λ, γ, ψ, m, f, k, h and v Policy variables: Fiscal policy: (G, t and TR) Monetary policy: (Mo, P) and Exchange Rate: (θ) 1. Explain the general role of parameters λ, γ, ψ, m, f, k, h, v in the algebraic model