- Consider The Following Economy Desired Consumption Cd 700 0 80 Y T 150r 272 300r Desired Investment Real Money De 1 (61.7 KiB) Viewed 61 times
Consider the following economy: Desired consumption: cd 700+ 0.80(Y-T)-150r. 272-300r. Desired investment: Real money demand: Full-employment output: Expected inflation: Initially the levels of taxes, government purchases, and money supply were, T= G = 500, and M = 460 Initially, the equations for the IS, LM, and the aggregate demand curves were, IS: Y 5360-2250r. LM Y = 4600 L=0.1Y 250i Y = 5,000. π = 0. AD: Y = 2822 +2180 + 2500r. Y=0+0) (1). Initially, the general equilibrium values of output (Y), price level (P), real rate of interest (r), consumption (C), and investment (/) were Y = 5,000, P = 1.00, r= 16.00 %, C = 4,276.0, 1 = 224.0. a. Now suppose that money supply, M = 460, as before, but T and G change to T = G = 400. Determine the equation for the new aggregate demand curve. (Hint: You first need to derive the IS and LM equations and then use them to derive the equation for the AD curve.) Aggregate demand equation: (Enter your responses rounded to the nearest whole number.): b. Given that the full-employment output is unchanged at 5,000, determine the new general equilibrium values of output, the price level, the real interest rate, consumption, and investment. Y=. (Enter your response rounded to the nearest integer.)
b. Given that the full-employment output is unchanged at 5,000, determine the new general equilibrium values of output, the price level, the real interest rate, consumption, and investment. (Enter your response rounded to the nearest integer.) (Enter your response rounded to two decimal places.) %. (Enter your response as a percentage rounded to two decimal places.) (Enter your response rounded to one decimal place.) (Enter your response rounded to one decimal place.) Y = P = r = C = 1 =