Given the equation IS 0.3Y +100i-252=0 and LM 0.2Y -200i-176=0.Find the equilibrium level of income Y and rate of interest i
"0.3Y+100r-252=0"
"100r=252-0.3Y"
"r=2.52-0.003Y" - The IS Curve
"0.2Y-200r-176=0"
"-200r=176-0.2Y"
"r=-0.88+0.002Y" - The LM Curve
"At" Equilibrium, IS Curve should intercept the LM Curve
"2.52-0.003Y=-0.88+0.002Y"
"2.52+0.88=0.002Y+0.003Y"
"3.4=0.005Y"
"Y=680"
Replacing the value of Y to get the value of interest rate r
"r=2.52-0.003(680)"
"r=2.52-2.04"
"r=0.48%"
Therefore the Output and interest rate at equilibrium are Y=680 and r=0.48%
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