1. Assume a two-sector economy where Y = C + I C = a + b Y I = f ( i ...... with a = $18 billion b = 0.8
and investment demand schedule/curve so that at i = Investment = 8% $60 billion 6% $70 billion 4% $80 billion 2% $90 billion
Instructions: Calculate an equilibrium income (IS) schedule/curve. For your answer simply indicate the equilibrium income associated with each different rate of interest.
2. Still assume a two-sector economy as above, but with S = -15 + .2 Y and investment demand schedule/curve such that at I = Investment= 7% $90 6% $110 5% $130 4% $150 Instructions: same as #1 above
3. Now let's assume a three-sector economy Y = C + I + G C = a + b Yd specifically, C = 20 + .8 Yd Yd = Y - Tx Tx = 50 billion I = f ( i ......... G = 100 billion G = Go Tx = Txo
and investment demand schedule/curve so that at I = Investment = 8% $60 billion 6% $70 billion 4% $80 billion 2% $90 billion
Instructions: Same as #1 and #2 above