Using the IS LM model, show how expansionary monetary and expansionary fiscal have same effect on output but opposite impact on interest rates.
b. Derive the equations for IS and LM curves from the set of equations given below:
C = 80+ 0.75Yd
I = 300-200 i G is government expenditure
G = 30
T = 30 where T= taxes
Ms = 270 where Ms is money supply
Md = 150+ 0.30Y – 300i
Find the volume of investment at equilibrium . What would be the impact on investment if Money supply is increased to 300.
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