In this problem, we're given equations that describe this economy, we're asked to explain each part of each equation, then derive the IS Curve and calculate the LM Curve. We graph the IS curve and LM curve diagrams. Then - using the IS and LM equations we just solved for - we find the equilibrium interest rate (r*) and real-income/real-output (Y*).
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~ 1:19 a. Identify each of the variables and briefly explain their meanings
~ 5:43 b. From the above list, use the relevant set of equations to derive the IS curve. Graph the IS curve on an appropriately labeled graph.
~ 9:13 c. From the above list, use the relevant set of equations to derive the LM curve. Graph the LM curve on the same graph you used in part (b)
~ 10:30 d. What are the equilibrium level of income and equilibrium interest rate?
From Mankiw's Macroeconomics (8th ed) Aggregate Supply Part 1 (Chapter 11) Problem 6
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