## Answers

Solution: Part II : Short anscuer. Question li Given, Gop Equation is, Yt = C++ It + GL+ EXE-IME Exports Ex = 0 imports IM =0 Consumption function is, Ct It = ãe Investorent fonction is, I d = a; - 5 (R + 7); 500 and G= agit @ Derivation of Is come as a relation between short run output if and real interest rate gap Rt-ri

-5 t + y = 4; -5 (4-1) + c + a Ý + +6 - Yt (i-āq) = ā; tāc - b(R4-) 16 Government spending multiplics (de) holding the real interest rate constant: 6 2 (R4-8) → gdy = -laita) dag (1-GG) ² latão b -97tas - CRL-D 2 C1-aa2 261-)2 (14-Y negative value multiplier greater than one or smaller than one; * It an be greater than l or smaller than I depending upon the vales of b, (Rtd) and as, ac, ai

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