Solve for the money market equilibrium
Course:- Business Economics
Reference No.:- EM13795702

Assignment Help
Assignment Help >> Business Economics

Consider a closed economy which can be characterized by the following equations: C = 400 + 0.8YD I = 600 + 0.1y- 1000r G = 300 T = 125 (M/P)d = 0.2Y-6000r (M/P)= 400 a. Solve for the goods market equilibrium and state the equation for the AD and IScurve. Draw both graphics. b. Solve for the money market equilibrium and LM and draw the graphics. c. Determine the equilibrium values for real GDP (Y), the real interest rate (r), private consumption(C), investment (I) and private saving (S). Show that in equilibrium total saving equals investments. Graphics d. Suppose that government uses contractionary fiscal policy and decreases government expenditures to G = 200. What happens to the equilibrium? (Repeat exercise (c) for the new government expenditures. Graphics. e. The Central Bank increases the money supply to 500. How this policy affects the final equilibrium? What is the new level of output and interest rate? Use graphics and explain

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Business Economics) Materials
An engineer must recommend one of two machines for integration into an upgraded manufacturing line. She obtains estimates from two salespeople. Salesman A gives her the estima
Consider the following production possibilities for a country that produces computer modems and DVD drives, and then answer the questions that follow, assuming that currently
Define what a public good is and give an example. Make sure to mention and explain the two key characteristics of a public good that make it different from a private good. (Hi
Skectch the fundamental analysis of the supply and demand curve for the British pound in terms of dollars. (The quantity of pounds on the horizontal axis and the US dollars
Tapscott believes that social media is becoming social production and that the Internet is a global supercomputer--every time people upload content to this supercomputer, it
Assume that the government places a 50 percent tax on widgets. Neither the demand for widgets or supply of widgets is perfectly elastic or inelastic. Draw a graph showing how
Evaluate the costs & benefits of Microsoft’s decision to produce the Surface tablet completely in-house in light of what you know about merged firms versus partners making com
Suppose the demand for a chemical is given by Q=100-3P, where quantity is measured in pounds. The market supply is given by MC = 6. Assume the social marginal cost of this pro