Answer to Question #73325 in Macroeconomics for REMI DJIMI

Question #73325
The Goods Market & The Financial Markets : The IS-LM Model Suppose that the economy of Biscuitville is characterized by the following goods market behavioural equations: C = 200 + 0:25YD I = 150 + 0:25Y - 1000i G = 250 T = 200 where there is only one good produced and consumed in the economy: biscuits! Suppose additionally that nancial markets are characterized by the following equations: (M=P)d = 2Y - 8000i M=P = 1600
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Expert's answer
2018-02-09T08:26:07-0500
1600 = (M=P) = 2Y – 8000i
i = - 0.2 + 0.00025Y
Y = (C – T) + I +G
Y = (200 + 0,25YD – 200) + 150 + 0.25Y – 1000( - 0.2 + 0.00025Y ) + 250
Y = 0.25Y + 600
0.75Y = 600
Y = 800.

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