Given the following equation, derive the expression for the IS curve

Given the following equation, derive the expression for the IS curve.

C =100 +0.8Yd (Consumption function)

I = 10 –10r (Investment function)

G = 10 (Government purchases)

T = 0.25 (Tax rate)

---

Solution

i.) IS Equation

Y = C + I + G

=100 +0.8(Y - 0.25 Y) + 10 – 10r + 10

=120 + 0.6Y – 10r

Y – 0.6Y = 120 –10r

Y = 300 – 25r -IS equation.

---

Zainabdawa answered the question on August 1, 2018 at 09:06

Exams With Marking Schemes

• Grade 1
• Grade 2
• Grade 3
• Grade 4
• Grade 5
• Grade 6
• Grade 7
• Grade 8
• Grade 9
• PP1
• PP2
• Playgroup
• Form 1
• Form 2
• Form 3
• Form 4

Related Questions

---

• Explain why fiscal and monetary policies are referred to demand management policies (Solved)
  

  Explain why fiscal and monetary policies are referred to demand management policies

  Date posted: August 1, 2018 .    Answers (1)

• Explain the three basic assumptions underlying the national income accounting (Solved)
  

  Explain the three basic assumptions underlying the national income accounting.

  Date posted: August 1, 2018 .    Answers (1)

• Explain the limitations of Harrod-Domar Models (Solved)
  

  Explain the limitations of Harrod-Domar Models.

  Date posted: August 1, 2018 .    Answers (1)

• Given the following equations for a certain economy C = 100 + 0.75 Y... (Solved)
  

  Given the following equations for a certain economy:
  
  C = 100 + 0.75 Y
  
  I = 560
  
  X= 350
  
  M = 40 + 0.15Y
  
  Suppose the figures are in US Dollars billion, determine the equilibrium level of income. (5 Marks)

  Date posted: August 1, 2018 .    Answers (1)

• State and explain the three components of Balance of Payments (BOP) (Solved)
  

  State and explain the three components of Balance of Payments (BOP).

  Date posted: August 1, 2018 .    Answers (1)

• What do you understand by the terms floating exchange rate regime and pegged exchange rate regime? (Solved)
  

  What do you understand by the terms floating exchange rate regime and pegged exchange rate regime?

  Date posted: August 1, 2018 .    Answers (1)

• Explain four reasons why residents of any country demand foreign currency in the foreign exchange market (Solved)
  

  Explain four reasons why residents of any country demand foreign currency in the foreign exchange market

  Date posted: August 1, 2018 .    Answers (1)

• State the theory of covered interest parity (Solved)
  

  State the theory of covered interest parity.

  Date posted: August 1, 2018 .    Answers (1)

• Explain the difference between covered interest arbitrage and uncovered interest arbitrage (Solved)
  

  Explain the difference between covered interest arbitrage and uncovered interest arbitrage.

  Date posted: August 1, 2018 .    Answers (1)

• Describe a full-reserve banking system (Solved)
  

  Describe a full-reserve banking system.

  Date posted: July 27, 2018 .    Answers (1)

• Give a critical view on Fractional-reserve banking (Solved)
  

  Give a critical view on Fractional-reserve banking.

  Date posted: July 27, 2018 .    Answers (1)

• Over the past decade, there has been a trend towards increasing the independence of central banks as a way of improving long-term economic performance. In... (Solved)
  

  Over the past decade, there has been a trend towards increasing the independence of central banks as a way of improving long-term economic performance. In respect to this statement discuss any 4 types of independence of a typical central bank.

  Date posted: July 27, 2018 .    Answers (1)

• The Central Bank has several instruments to use to counter changes in the market and influence price stability. Discuss any 5 of the instruments. (Solved)
  

  The Central Bank has several instruments to use to counter changes in the market and influence price stability. Discuss any 5 of the instruments.

  Date posted: July 27, 2018 .    Answers (1)

• Discuss any five (5) determinants of the changes in interest rates (Solved)
  

  Discuss any five (5) determinants of the changes in interest rates.

  Date posted: July 27, 2018 .    Answers (1)

• Assess the main reasons as to why the government regulate business activities in your country (Solved)
  

  Assess the main reasons as to why the government regulate business activities in your country.

  Date posted: July 26, 2018 .    Answers (1)

• Explain six reasons why developing countries should invest largely in small scale industries rather than in large scale industries (Solved)
  

  Explain six reasons why developing countries should invest largely in small scale industries rather than in large scale industries.

  Date posted: July 26, 2018 .    Answers (1)

• Explain the measures that can be taken to curb the challenges developing countries face in their industrial sectors (Solved)
  

  Explain the measures that can be taken to curb the challenges developing countries face in their industrial sectors.

  Date posted: July 26, 2018 .    Answers (1)

• Examine the key obstacles faced by developing countries in their industrial sectors (Solved)
  

  Examine the key obstacles faced by developing countries in their industrial sectors.

  Date posted: July 26, 2018 .    Answers (1)

• Let us say there is a sudden increase in demand in Kenya for Italian products. Explain how this increase will have an impact on the... (Solved)
  

  Let us say there is a sudden increase in demand in Kenya for Italian products. Explain how this increase will have an impact on the money supply in Kenya's economy

  Date posted: July 21, 2018 .    Answers (1)

• Outline functions of tender committee. (Solved)
  

  Outline functions of tender committee.
  

  Date posted: July 16, 2018 .    Answers (1)