Use the theory behind the IS and LM curve London has a closed economy with the following information Y = C+I+G C = 98 + 0

We are provided with the following informations:

C = 98+0.6(Y-T)

I = 130 -10r

G = T = 30

M^d/ P = Y -15r

M^s = 600

P = 1.5

The eqiuilibrium in the goods market is given as:

Y = C +I +G

Putting the given values, the equation becomes,

Y = 98+0.6(Y-30) + 130 -10r + 30

Y = 240 + 0.6Y -10r

0.4Y = 240 -10r

Y = 600 - 4r.......(i)

This is the equation of the IS curve.

The equilibrium in the money market is given as:

Money demand = Money supply [ Md = Ms]

M^d/ P = Y -15r

M^d = 1.5Y - 22.5r

Putting the values, the equilibrium condition becomes,

1.5Y - 22.5r = 600

Y = 15r +40......(ii)

Solving equations (i) and (ii)

600 - 4r = 15r +40

19r = 560

r = 29.4%

Thus, Y = 481

The equilibrium rate of interest is 29.4% and the equilibrium income is 481.