Question

In a three sector model of economy suppose
C = 0.8 (1-t)Y
I = 900-50 i
G = 800
T = 0.25
L = 0.25Y - 62 i
M/P = 1000
P = 2
i) Write down the equa-on for the IS and LM curve
ii) What are the equilibrium levels of Income and the interest rate?
iii) Compute the level of investment and budget surplus corresponding to equilibrium Income?​

Answer 1

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