Suppose a n inflationary economy can be described by the following

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Question

Suppose a n inflationary economy can be described by the following equations representing the goods and money markets:

C = 20 + 0.7Yd

M = 0.4Yd

I = 70 – 0.1r

T = 0.1Y

G = 100

X = 20

Ld = 389 + 0.7Y – 0.6r

L s = 145

where G represents government expenditure, M is imports, X is exports, Y is national income, Yd is disposable income, T is government taxes (net of transfer payment s ), I is investment, r is the rate of interest, C is consumption, L d is money demand, and Ls is money supply.

i) Solve for the equilibrium level of national income and the equilibrium rate of interest in this economy.(please show all work for setting up the equations)

Suppose a n inflationary economy can be described by the following

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