C=1000+.65(Y-T),I=100+.1Y-10r,G=400,T=.35Y-100,X-M=700-.15Y

If the government spending increases by 250,the IS curve is given by

a)Y=3370.5-15.9r

b)Y=3609.6-15.9r

c)Y=4008.0-15.9r

Can any one please help me with this one…

C=1000+.65(Y-T),I=100+.1Y-10r,G=400,T=.35Y-100,X-M=700-.15Y

If the government spending increases by 250,the IS curve is given by

a)Y=3370.5-15.9r

b)Y=3609.6-15.9r

c)Y=4008.0-15.9r

Can any one please help me with this one…

They need to tell you how *r* affects (S – I); I don’t see that here.

r =real interest rate, just checked

I know what *r* is; the question is how it affects (S – I).

Sorry sir ,what ever information was given i have provided.Personally i found the wording of this question very ambiguous .

The answer to this question is given as :c)Y=4008.0-15.9r

But no explanation of how they got this is given!!!

Wouldn’t you just increase G from 400 to 650, then solve the equation C+I+G+(X-M)?

Y=C+G+I+(X-M)

Solve for Y and you’ll get the answer.

My point is that even if you solve any of these, you haven’t introduced *r* into the equation, and the answer has *r* in it. *r* has to come from somewhere.

S2000magician, wouldn’t the equation for “I” introduce r? Or are you talking about something else?

I=100+.1Y-10r

My mistake: I missed the *r*.

Back in a flash.

Now since the confusion is over…pls can i get a solution to this problem??

Just a bunch of algebra:

Y = C + G + I + (X – M)

Y = 1,000 + 0.65(Y – T) + (400 + 250) + 100 + 0.1Y – 10_r_ + 700 – 0.15Y

Y = 2,450 + 0.6Y – 0.65T – 10_r_

0.4Y = 2,450 – 0.65(0.35Y – 100) – 10_r_

0.4Y = 2,450 – 0.2275Y + 65 – 10_r_

0.6275Y = 2,515 – 10_r_

Y = 4,007.968 – 15.93625_r_

Thanks sir

either i have forgotten everything about CFA or my L1 in 2010 never had this before

You’re welcome.