Answer to Question #198956 in Math for Majika Mashudu

Question

For the commodity market Y=C+IC=aY+b (0 <a <1, b> 0)I=cr+d (c <0, d> 0)

Where r is the intetest rate.

(a )show that, when the commodity market is in equilibrium, (1-a) Y-cr=b+d

(b) for money market

(money market)  Ms=Ms*    (Ms*> 0)

(Total demand for money) Md=k1Y+k2r+k3 (k1> 0, k2 <0, k3 <0)

(equilibrium) Md=Ms

Show that when money market is in equilibrium k1Y+k2r=Ms-k3

(c) By solving the simultaneous equation s derived in parts (a) n (b )show that when tje cpmmodity and money markets are both in equilibrium

Y=k2 (b+d)+c (Ms*-k3)/(1-a) k2+ck1

(d) write down the money supply multiplier, ▲Y/▲Ms* and deduce that an increase in Ms* causes an increase in Y.

Answer 1

Dear Majika Mashudu, your question requires a lot of work, which neither of our experts is ready to perform for free. We advise you to convert it to a fully qualified order and we will try to help you. Please click the link below to proceed: Submit order