(a) Describe the components of equation Y = C+I+G+(X-M) with examples from a ‘real world’ economy (Australia or other).

(b) Using the demand and supply for money model, do the following:

(i) Show how interest rates are determined.

(ii) Show the effect in your graph of an increase in the money supply and describe the money market adjustment process to a new equilibrium interest rate.

-- Manish Talwar (mompy_2k2@yahoo.co.in), May 26, 2004

Answers

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-- khaja (sid_ra4@rediff.com), June 08, 2004.