11) (MC) In the macroeconomic model below, Y is aggregate output, C is aggregateconsumption, I is aggregate investment, r is interest rate, Go is government spending, Mois supply of money, and t is tax rate. The variables Y, I, C, and r are endogenous, Go, Mo,and t are exogenous, and a, b, c, d, k, and m are parameters.a) Y* =Using Cramer's rule, solve for Y* and I*. Which of the following gives the equilibrium valuesof Y* and I*?b)c)d)Y* =f)Y* =e) Y* =Y* =Y* = 0Y* =m Mo + b(ca)kd + m [1 − b(1 – t)]Y=C+I+GoC = a + b(1 t)YMo + Gokd + m [1 − b(1 – t)]-Mo+mGo+c+akdm [1+b(1 t)]I* =mGo - c + akd-btdMo + m (Go+c+a)kd+m[1-b(1 – t)]-kdm [1 + b(1aGo-c+mMokd-btI* =I* =I* =-dk (a + Go)t)]I* =I= c - drMokY mrmCka+dGokd + m [1 b(1 t)]-I* = 0m - dk (a + Go)kd+m[1-b(1 – t)]mC (mCdMo) b(1 t) - dk (a + Go)kd+m[1-b(1 – t)]-(mC+dMo) b(1-t)kd-btmCb(1 t)kd-bt

Y (Aggregate Output): Aggregate output, often denoted as Y, represents the total value of goods and…

11) (MC) In the macroeconomic model below, Y is aggregate output, C is aggregate consumption, I is aggregate investment, r is interest rate, Go is government spending, Mo is supply of money, and t is tax rate. The variables Y, I, C, and r are endogenous, Go, Mo, and t are exogenous, and a, b, c, d, k, and m are parameters. Using Cramer's rule, solve for Y* and I*. Which of the following gives the equilibrium values of Y* and I*? a) Y* b) Y* = d) = c) Y* = e) Y* = f) Y* = Y* = 0 g) Y*= m Mo + b(c-a) kd+m[1-b(1-t)] I=c-dr Y=C+I+Go C=a+b(1 t)Y Moky - mr Mo + Go kd + m [1-b(1 – t)] Mo+mGo+c+a kdm [1 + b(1 t)] I* = dMom (Go + c + a) kd + m [1-b(1 t)] mGo - c + a kd-bt aGo - c+mMo kd-bt - I* = -dk (a + Go) kdm [1 + b(1 t)] I* = I* = = = I* = mCka+dGo kd+m[1-b(1 t)] m - dk (a + Go) kd + m [1-b(1 t)] I* = 0 - I* = (mC+dMo) b(1-t) kd-bt mC (mCdMo) b(1 t) - dk (a + Go) kd + m [1-b(1 t)] - - mCb (1 – t) kd-bt

11) (MC) In the macroeconomic model below, Y is aggregate output, C is aggregate consumption, I is aggregate investment, r is interest rate, Go is government spending, Mo is supply of money, and t is tax rate. The variables Y, I, C, and r are endogenous, Go, Mo, and t are exogenous, and a, b, c, d, k, and m are parameters. Using Cramer's rule, solve for Y* and I. Which of the following gives the equilibrium values of Y and I? a) Y b) Y* = d) = c) Y* = e) Y* = f) Y* = Y* = 0 g) Y= m Mo + b(c-a) kd+m[1-b(1-t)] I=c-dr Y=C+I+Go C=a+b(1 t)Y Moky - mr Mo + Go kd + m [1-b(1 – t)] Mo+mGo+c+a kdm [1 + b(1 t)] I = dMom (Go + c + a) kd + m [1-b(1 t)] mGo - c + a kd-bt aGo - c+mMo kd-bt - I* = -dk (a + Go) kdm [1 + b(1 t)] I* = I* = = = I* = mCka+dGo kd+m[1-b(1 t)] m - dk (a + Go) kd + m [1-b(1 t)] I* = 0 - I* = (mC+dMo) b(1-t) kd-bt mC (mCdMo) b(1 t) - dk (a + Go) kd + m [1-b(1 t)] - - mCb (1 – t) kd-bt

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. Supply and demand in the neoclassical economy Consider an economy in which the consumption, investment and production functions are as follows. C = 90 + 0.7(Y − T) I = 250 − 20r F(K, L) = AK0.5L0.5 The capital and labor supply are equal to 100 each, A=10, G = 200 and T = 200. Compute the equilibrium values of output, overall labor income, consumption, public savings, national savings, investment, and the interest rate. Suppose now government spending increases to G=300 (everything else stays the same). What happens to output, consumption, savings, investment and the interest rate? Compute the new values for these variables.
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c and d
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