The IS and LM curves for the economy have the following equations :
IS : YIS = k (AP – 200 R )
LM: YLM = 5 (MS/P) + 500 R
Where the multiplier k= 2.5 ,
Autonomous Spending AP = 5200,
Money Supply MS = 1800
and Price P0 = 1.
Find the equilibrium level of interest rate
Find the equilibrium level of output
What will be the equilibrium output and interest rate for the prices of P1 = 1.2 and P2 = 2.0.
Please graph the relationship between the price level and the output y.
What variable does this relationship represent?