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Find a numerical equation relating planned aggregate

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Reference no: EM132876504

Problem - An economy is described by the following equations:

C =15500+0.5(Y-T) - 50000r,

IP = 10000-20000r,

G = 8000,

X = 1300,

M = 1800,

T = T = 8000,

Y* = 50000

Required -

(a) Find a numerical equation relating planned aggregate expenditure to output and to the real interest rate (Given PAE=C+IP+G+NX).

(b) What should the Reserve Bank set the real interest rate to eliminate output gap if any?

Reference no: EM132876504

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