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Questions › DSE › DSE 2021 › Q39
4 marks, −1Macroeconomics › IS-LM model › Equilibrium and shifts in IS-LMModerateabout 2 min

DSE 2021 Question 39: IS-LM model

Consider the same economy (C=0.8(1−τ)YC = 0.8(1-\tau)YC=0.8(1−τ)Y, τ=0.25\tau = 0.25τ=0.25, I=900−50rI = 900 - 50rI=900−50r, Gˉ=800\bar{G} = 800Gˉ=800, L=0.25Y−62.5rL = 0.25Y - 62.5rL=0.25Y−62.5r, Mˉ/P=500\bar{M}/P = 500Mˉ/P=500). Find the equilibrium aggregate income in this economy.

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Consider the same economy (C = 0.8(1-τ)Y, τ = 0.25, I = 900 - 50r, Ḡ = 800, L = 0.25Y - 62.5r, M̄/P = 500). Find the equilibrium aggregate income in this economy. (A) Y = 3000 (B) Y = 3500 (C) Y = 4000 (D) Y = 4500

Also written as: Consider the same economy (C = 0.8(1-tau)Y, tau = 0.25, I = 900 - 50r, G_bar = 800, L = 0.25Y - 62.5r, M_bar/P = 500). Find the equilibrium aggregate income in this economy.

IS-LM model has come up 137 times in 7 exams since 2004.

What this question tests

This question is on Equilibrium and shifts in IS-LM, part of IS-LM model in Macroeconomics.

Solving for income and the interest rate and tracing what shifts each curve.

TestStop has 18 past-paper questions on this subtopic; the nearest in year are below.

  • IIT JAM 2022 · Q57Product market: C = 300 + 0.8(Y - T), T = 200 + 0.2Y, I₀ = 300, G₀ = 400. Money market: M₀/P = 0.4Y - 200i…
Practise IS-LM modelMore on Equilibrium and shifts in IS-LM

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Question from the DSE 2021 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.