11. A closed economy has the following parameters and functions that describe its components: • Consumption function: C = 180 +0.7(Y – T) • Desired investment function: = 120 - 18r - 0.1Y • Tax: T=400 • Government purchases of goods and services: G= 500 • Real money demand: L = 6Y - 120i • Real money supply: M/P = 5400 In money market, MIP = L. Assume the price level P= 1. Assume no inflation is expected. Build the IS-LM model and find the equilibrium level of real interest rate and real GDP.

11. A closed economy has the following parameters and functions that describe its components: • Consumption function: C = 180 +0.7(Y – T) • Desired investment function: = 120 - 18r - 0.1Y • Tax: T=400 • Government purchases of goods and services: G= 500 • Real money demand: L = 6Y - 120i • Real money supply: M/P = 5400 In money market, MIP = L. Assume the price level P= 1. Assume no inflation is expected. Build the IS-LM model and find the equilibrium level of real interest rate and real GDP.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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