# Answer to Question #66481 in Macroeconomics for kwame

Question #66481

Consider the following IS–LM model: C = 200 + .65YD, I = 150 + .25Y - 1000i, G = 250, T = 200, Md>P = 2Y - 8000i, M/P = 1600

a. Derive the IS relation and LM relation

b. Solve for the equilibrium interest rate.

c. Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G.

d. Now suppose that the money supply increases to M/P = 1,840. Solve for Y, i, c, and T, and describe in words the effects of an expansionary monetary policy.

e. Set M/P equal to its initial value of 1,600. Now suppose that government spending increases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, i, and C.

a. Derive the IS relation and LM relation

b. Solve for the equilibrium interest rate.

c. Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G.

d. Now suppose that the money supply increases to M/P = 1,840. Solve for Y, i, c, and T, and describe in words the effects of an expansionary monetary policy.

e. Set M/P equal to its initial value of 1,600. Now suppose that government spending increases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, i, and C.

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