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Old 03-24-2008, 12:46 AM
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Economics for math~~~thank you for helping!!!!?

Assume that the following equation represent behavior in the goods and money markets of a fixed price closed economy

Good market
Consumption: C=A+c(Y-T)-dR
Investment: I=B-iR
Taxes: T=tY
Equilibrium: Y=C+I+G

Money market
Money supply: Msupply=M
Money demand: Mdemand=kPY+N-mR
Equilibrium: Msupply=Mdemand

where A=autonomous consumption, B=autonomous investment, C=consumption, G=government expenditure, I=investment, R=rate of interest(%), T=net taxes, y=income, output, Msupply=money supply, Mdemand=money demand, N=autonomous money demand, P=price level. Lower case letters denote parameters of the model.

(a) Derive an expression for the IS curve, using the equations for the goods market.
(b) Derive an expression for the LM curve, using the equations for the money market.
(c) Assuming the following values for the variables and parameters in the model, determine the equilibrium values of income and the rate of interest. Plot the IS and LM curves and verify your answer.
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