<p>I cannot post this as a comment but the question you are asked is to find the equilibrium Y using the LM curve. All the information is given to you here, <span class="math-container">$M = 100, P = 1, r= 0.025$</span>. This will give you the equilibrium level of <span class="math-container">$Y$</span>. Think of it this way, the LM curve and the information you are provided gives you the level of <span class="math-container">$Y$</span> in this economy, then for an equilibrium <span class="math-container">$G$</span>, <span class="math-container">$T$</span> and <span class="math-container">$e$</span> will have to be determined "residually" to satisfy this level (this does not preclude that the exchange rate is determined endogenously given a floating exchange rate regime). </p>

CC BY-SA 4.0
2019-04-21T14:44:30.737Z
2019-04-21T14:44:30.737Z
Ali
<p>Assume that the LM curve for a small open economy with a floating exchange rate is given by Y =
200r – 200 + 2(M/P), while the IS curve is Y = 400 + 3G – 2T + 3NX – 200r. The function for NX is
NX = 200 – 100e, where e is the exchange rate. The price level (P) is fixed at 1.0. The international
interest rate is r
* = 2.5 percent.</p>

<p>Using the LM curve, find the equilibrium level of Y in the small open economy, if M = 100</p>

<p>My question is,how do i find the equilibrium Y given that I don't have the values of G and T?</p>

CC BY-SA 4.0
2019-04-22T02:46:12.280Z
You are given way more information than you need to answer the question. Just forget about the IS curve, basically.
Regio
<macroeconomics><general-equilibrium><open-economy-macro>
find the equilibrium level of Y
Slim Shady
# find the equilibrium level of Y

(Asked by: username_0 on 2019-04-21)

Assume that the LM curve for a small open economy with a floating exchange rate is given by Y =
200r – 200 + 2(M/P), while the IS curve is Y = 400 + 3G – 2T + 3NX – 200r. The function for NX is
NX = 200 – 100e, where e is the exchange rate. The price level (P) is fixed at 1.0. The international
interest rate is r
\* = 2.5 percent.

Using the LM curve, find the equilibrium level of Y in the small open economy, if M = 100

My question is,how do i find the equilibrium Y given that I don't have the values of G and T?

**Tags:** macroeconomics, general-equilibrium, open-economy-macro

> **Comments:**
> **username_1**: You are given way more information than you need to answer the question. Just forget about the IS curve, basically.  

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## 1 answers

### Answer by username_2 on 2019-04-21. Score: 1 | Accepted answer

I cannot post this as a comment but the question you are asked is to find the equilibrium Y using the LM curve. All the information is given to you here, $M = 100, P = 1, r= 0.025$. This will give you the equilibrium level of $Y$. Think of it this way, the LM curve and the information you are provided gives you the level of $Y$ in this economy, then for an equilibrium $G$, $T$ and $e$ will have to be determined "residually" to satisfy this level (this does not preclude that the exchange rate is determined endogenously given a floating exchange rate regime).


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