Question

Consider an economy described by the following equations:  C = 100 + 0.6 ∗ (Y −

  • T (consumption function)  I = 200 − 1000 ∗ r (investment function)  G = T = 100 (government purchase and tax) where Y is the national income and r is the interest rate. Derive the IS curve. 
A 0.4Y + 1000r = 340
B 0.6Y + 1000r = 240
C 0.4Y + 1000r = 240
D 0.6Y + 1000r = 340
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