The objective of this chapter is to study how money and interest rate is determined in the money and financial market. The money and financial market is the market in which money and various financial assets (such as, bonds and stocks) are exchanged
Question 1: Suppose in an open economy the consumption function take the form C 8Yd =100 + 0. Tax is the proportion of income with the tax rate to be given by 0.2. Meanwhile import depends on the domestic income with the function given by
