1.Consider a closed economy that is characterized by the followin9 equations:Y = C +|+ G(1)C = 500 + 0.75(Y-T)(2)| = 375 -25r(3)T = 500(4)G = 500(5)m, = m,(6)m = 1000(7)m, = 0.5Y(8)m. = -50r(9)Where Y is the GDP, C is private consumption expenditure, I is the Investmentexpenditure, G is government expenditure, T is tax revenues, M is money supply. m,is transaction demand for money, M, is the speculative demand for money and r isthe interest rate (in % points).a) Derive (m/P) the demand for real money balances equation (where P is theaggregate price level.)b) Derive the IS and LM equations of the economy (Express Y as a function of r andassume P is fixed at 1.0.)c) Calculate the short-run equilibrium values of Y and r in the economy. Consider a closed economy that is characterized by the following equations:Y = C +1+ G(1)C = 500 + 0.75(Y-T)(2)| = 375-25r(3)T = 500(4)G = 500(5)m = m,(6)m. = 1000(7)m, = 0.5Y(8)m, = -50r(9)Where Y is the GDP, C is private consumption expenditure, I is the Investmentexpenditure, G is government expenditure, T is tax revenues, M̟ is money supply, M,is transaction demand for money. M, is the speculative demand for money and r isthe interest rate (in % points).a) Derive (m/P) the demand for real money balances equation (where P is theaggregate price level.)b) Derive the IS and LM equations of the economy (Express Y as a function of r andassume Pis fixed at 1.0.)c) Calculate the short-run equilibrium values of Y and r in the economy.

Given Y=C+I+G ........... (1) C=500+0.75(Y-T) ......... (2) I=375-25r…

1. Consider a closed economy that is characterized by the following equations: Y = C +| + G (1) C = 500 + 0.75(Y-T) (2) | = 375-25r (3) T = 500 (4) G = 500 (5) m, = m, (6) M = 1000 (7) m, = 0.5Y (8) = -50r (9) Where Y is the GDP, C is private consumption expenditure, I is the Investmen expenditure, G is government expenditure, T is tax revenues, M is money supply, M is transaction demand for money, M, is the speculative demand for money and ris the interest rate (in % points). a) Derive (M/P) the demand for real money balances equation (where P is the aggregate price level.) b) Derive the IS and LM equations of the economy (Express Y as a function of r and assume P is fixed at 1.0.) c) Calculate the short-run equilibrium values of Y and r in the economy.

1. Consider a closed economy that is characterized by the following equations: Y = C +| + G (1) C = 500 + 0.75(Y-T) (2) | = 375-25r (3) T = 500 (4) G = 500 (5) m, = m, (6) M = 1000 (7) m, = 0.5Y (8) = -50r (9) Where Y is the GDP, C is private consumption expenditure, I is the Investmen expenditure, G is government expenditure, T is tax revenues, M is money supply, M is transaction demand for money, M, is the speculative demand for money and ris the interest rate (in % points). a) Derive (M/P) the demand for real money balances equation (where P is the aggregate price level.) b) Derive the IS and LM equations of the economy (Express Y as a function of r and assume P is fixed at 1.0.) c) Calculate the short-run equilibrium values of Y and r in the economy.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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