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# Need Help With International Economics Problem watch

1. Assuming the following model of a hypothetical economy:
C=.8(Y-T)
T=1,000
I=800-20r
G=1,000
Md=.4Y-40r
Ms=1,200
a. Write a numerical formula for IS Curve showing Y as a function of r.
b. Define the LM curve and write down its numerical formula.
c. Calculate short-term equilibrium levels of Y, r, C, and I. Does investment equal national saving at
equilibrium?
d. Suppose that G increases by 200, what will be the change in Y? What is the government purchase
multiplier?
e. Suppose that G is back to its original level and Ms
increased by 200, what will be the short-run
change in Y? What is the money supply multiplier?
2. a. IS : Y= 5(1000-20r)
b. LM : Y = 100r+30000
c. r=10 / Y=4000 / C=2400 / I=600
d. Y=4500 (dY=500)
e. Y=4250 (dY=250)

In d. Y changes less than it was supposed to be (multiplier times change in autonomous component or G) as interest rates rises which crowds out investment,

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