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{"ops":[{"insert":"For the commodity market\u00a0Y=C+IC=aY+b (0 <a <1, b> 0)I=cr+d (c <0, d> 0)"},{"attributes":{"header":1},"insert":"\n"},{"insert":"Where r is the intetest rate.\n(a )show that, when the commodity market is in equilibrium, (1-a) Y-cr=b+d\n(b) for money market\n(money market) \u00a0Ms=Ms* \u00a0 \u00a0(Ms*> 0)\n(Total demand for money) Md=k1Y+k2r+k3 (k1> 0, k2 <0, k3 <0)\n(equilibrium) Md=Ms\nShow that when money market is in equilibrium k1Y+k2r=Ms-k3\n(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\nY=k2 (b+d)+c (Ms*-k3)\/(1-a) k2+ck1\n(d) write down the money supply multiplier, \u25b2Y\/\u25b2Ms* and deduce that an increase in Ms* causes an increase in Y.\n"}]}
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