(1). Consider the following macroeconomic model of Tropicana. Y = C+1+G C = 90 + 0.9Y. ..(Income identity) (Consumption) (Investment) (Government) (Money market Equilibrium) | = 900-90OR.. G = Go M = (0.9Y-900R) P. %3D Y = aggregate real output, R = the interest rate, M = the money supply and P the price level. Limit figures to one decimal place when answering the questions below except where many zeros are involved. (a)Tropicana has been described as a closed economy. What does this mean? Is this evident from the macroeconomic description of Tropicana? (b)Derive the expression for aggregate real output Y. (c)Briefly explain why the expression in part (b) is an aggregate demand equation (curve). Lcunply is $800 government spending is $1000,

(1). Consider the following macroeconomic model of Tropicana. Y = C+1+G C = 90 + 0.9Y. ..(Income identity) (Consumption) (Investment) (Government) (Money market Equilibrium) | = 900-90OR.. G = Go M = (0.9Y-900R) P. %3D Y = aggregate real output, R = the interest rate, M = the money supply and P the price level. Limit figures to one decimal place when answering the questions below except where many zeros are involved. (a)Tropicana has been described as a closed economy. What does this mean? Is this evident from the macroeconomic description of Tropicana? (b)Derive the expression for aggregate real output Y. (c)Briefly explain why the expression in part (b) is an aggregate demand equation (curve). Lcunply is $800 government spending is $1000,

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Use the following data table to answer the questions below, dollar arnounts are in billions. Consumption Money Market Government G- 6,000 ↑ = 5,000 -10 or 10 C = 900 + 80(Y-T) Investment Full Employment -8,000 -7,500 y- 51,500 Using the data from above, solve for the economy's current equilibrium (y"). If necessary, round your final calculation to two decimal places.
1. Within the IS-LM and AD-AS model, show how income, interest rate and price level are affected by each of the following both in the fixed and flexible price cases: a. An autonomous increase in investment spending. b. A decline in taxes. c. A decline in the money supply. In each case, explain why the changes in income and the interest rate occur. Use IS-LM and AS-AD diagrams.
Suppose the economy of Ghana in 2020 was characterized by C = ¢400m + 0.75(Y-T); I = ¢400m - 20r; G = ¢200m; T = ¢200m; Ms = ¢250m/P; Md = 0.25Y - 10r a. Derive the IS and LM curve equations. Give a brief explanation as to why they are positively or negatively sloped. b. Calculate equilibrium output and interest rates (in this case assume P=1). Econ313 2020/2021 PROBLEM SET 2 Page 1 of 2 c. Suppose the government of Ghana in the second half of 2020 spent an additional ¢50m to mitigate the impact of the COVID pandemic on households and businesses and government tax revenue declined by 10% as a result of the lockdown in Ghana what will be the new equilibrium output? d. Will the policy in (c) above have an impact on interest rate? Briefly explain. e. What is the amount of the fiscal deficit incurred as a result of the government fiscal policies as pursued in (c) above?
When deriving the LM curve, a/an _____________ indicates that the central bank chooses the _________________ and this will determine the required ______________ . (a) Negatively sloping curve; money supply; interest rate; (b) Horizontal line; interest rate; money supply; (c) Upward sloping curve; interest rate; money supply; (d) Vertical line; money stock; interest rate.
14. Of the following secondary effects which dissipate the strength or effectiveness of expansionary Keynesian macroeconomic policy, which one is associated with rising interest rates because of greater government borrowing to finance a budget deficit? a) Crowding out effect b) Inflation c) transactions demand for money d) sovereign debt crisis e) All the above
In the long run, what happens to consumption, investment, and the interest ratewhen the government increases taxes in a closed economy?If inflation rises from 10 to 14 percent, explain what happens to real and nominal interest rates according to the Fisher effect?
Please note that this is a multi part quesition; thank you so much for your time and effort it means so much to me! Figure 1: Hayek’s (Classical) AD-AS Model (Image normally goes here) Part 1: Why does Hayek’s aggregate supply curve always lead to an equilibrium level of national output equal to the full-employment level of real GDP? Part2: Hayek says that markets will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayek’s idea that governments cannot increase real GDP beyond the level that the free market economy is able to produce? Part 3: Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?
Consider the following Keynesian economy Desired consumption: c" -220 + 0.6(Y - T)-200r Desired investment: 300 - 300r Taxes: T=20 + 0.2Y Government purchases: G= 152 Net exports: NX 150 -0.08Y -500r Money demand: L0.5Y -200r Money supply: M=936 Full-employment output: Y 1000 In this economy, the real interest rate does not deviate from the foreign interest rate. a. In the general equilibrium (that is, the long run), the value of output is 1000 , the real interest rate is 0.210, consumption is 646, investment is 237, net exports are -35, and the price level is 2.044 (Enter values rountled to three decimal places for the real interest rate and price level, and enter values rounded to integers for all other values.) b. Starting from full employment, govermment purchases are increased by 58, to 210. As a result of this change, in the short run, output becomes 1019. the real interest rate becomes 0.257, the consumption becomes 640, investment becomes 223, and net exports become - 60 (Enter…
By using IS-LM-FE and AD-AS frameworks show;According to RBC theory, what is the effect of an increase in government expenditures on real interest rate (r), real output (Y), and price level (P) in the short and in the long-run? Why? Explain with details.
Cd= 200+.8Y - 500r Id= 200 – 500r Real interest rate r in the equilibrium equals .2. What is the government spending G of this economy so that its full employment output of Y is 1000? Suppose M bar=8000 and r=.2. L(Y,r)=.75Y-250r. What is the price level P in this economy for Y=1000? Please draw your IS-LM curves in your graph. Use the graph to illustrate what may happen if the company had an adversary price shock.