1. An economy has the following variables: Goods Market: Y=500 C=25 + 2/3 (Y-T)-100r I=120-300r G=75 T=50 a) Graphically draw (a rough sketch is fine) of the goods market. Assuming you start at the closed economy equilibrium what is the initial r, S, I? b) Suppose that there is a reduction of G by 25, What is the new r, S, I? Show this graphically. c) Starting with the initial information suppose instead that there is a reduction of I by 25, What is the new r, S, I? Show this graphically.

1. An economy has the following variables: Goods Market: Y=500 C=25 + 2/3 (Y-T)-100r I=120-300r G=75 T=50 a) Graphically draw (a rough sketch is fine) of the goods market. Assuming you start at the closed economy equilibrium what is the initial r, S, I? b) Suppose that there is a reduction of G by 25, What is the new r, S, I? Show this graphically. c) Starting with the initial information suppose instead that there is a reduction of I by 25, What is the new r, S, I? Show this graphically.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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