I've done something similar to this before, but my knowledge on it is a bit rusty. I've managed to come up with some answers on the first half of the problem, but I forget how the second half is solved. The question is listed word-for-word.
A closed economy is described by the following simple IS-LM system:
(consumption)
(investment)
(government spending)
(money demand)
(money supply)
whereand
are the interest and real GDP, respectively, and
,
,
,
, and
are known constants (exogenous parameters).
a) Find an expression for the linear IS curve and an expression for the linear LM curve.
My answers
IS Curve:
LM Curve:, where
represents the price level.
b) Find solutions forand
.
(I don't have any answers for these yet)
If someone could help me out with the second half of the question, that'd be great. Also, if I've done anything wrong with the first half, please point it out.


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