(iii) Solve for the output level (Y), the interest rate (r) and the price level (P) in equilibriumShow and explain your steps clearly.(iv) Show algebraically whether monetary policy is neutral or not in this economy.Part III. Application. 2.2Consider the following functions for a model economy:Consumption:C=C, +c (Y-T)Investment:I-1, +a Y -brLabour Supply:BN - W/PMoney Demand:L-L, +kY - hiProduction Function: Y AK"NTax Revenue:T=T, +tYAll variables with a subscript 0 denotes the autonomous component, e.g. C, is autonomousconsumption. All lower-case letters (except the real interest rate r and the nominal interest rate I)are parameters. Government expenditure (G), the money supply (M), the level of technology (A)and capital stock (K) are all exogenously given. N is the level of labour employed. For thiseconomy, the general price level (P) and the nominal wage rate (W) are fully flexible. The expectedinflation is assumed to be zero.

Macroeconomics refers to the branch of economics that deals with the performance, structure,…

Answered: 2.2 Consider the following functions…

ENGR.ECONOMIC ANALYSIS

14th Edition

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Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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The formula for economic impact is I(r)=(A)/1-r The formula for impact change is ∆I= I'(r)*∆r The formula for percentage change is g(r)=(r)/1-r
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
2. Question 2: Suppose that you estimate a model of the aggregate annual retail sales of new cars that specifies that sales of new cars are a function of real disposable income, the average retail price of a car adjusted by the consumer price index, and the number of sports utility vehicles sold (you decide to add this independent variable to take account of the fact that some potential new car buyers purchase sports utility vehicles instead). You use the data (annual from 2000 to 2014) and obtain the following estimated regression equation: CARS, = 1.32 + 4.91Y D; + 0.0012 PRICE, - 7.14 SUV (2.39) (0.00045) (71.40) 1 where CARS = new car sales (in hundreds of thousands of units) in year t, YD; = real disposable income (in hundreds of billions of dollars), PRICE = the average real price of a new car in yeart (in dollars), SUV = the number of sports utility vehicles sold in year t (in millions). You expect the variable YD to have a positive coefficient and the variables PRICE and SUV to…
NB: Solve Question A (ii), (iii), and (iv)
Suppose that the economy is summarized by the following: Technology (Production Function): Yt = 10 (Kt)0.3 (Lte)0.7 Consumption function: Ct = 0.8Yt Depreciation rate: 8% (i.e. δ= 0.08) Population growth: 2% (i.e. n = 0.02) Technological growth: 4% (i.e. g = 0.04) QUESTIONS: Find the steady state (long run) equilibrium values of kte, yet, and cet. Show graphically what would be the effect of a increase of the saving rate to s=0.4? Show graphically what would be the effect of an increase in population growth to 0.04? Assuming that in 2013 the US economy is in the steady state and L2013 = Le2013 = 8, what is the value of ke2014, ye2014, ce2014 , k2014, y2014, and c2014 ? Use your answer to e) to calculate the growth rate of ket, yet, cet , kt, yt, and ct Based on your answers to the previous questions and on your knowledge of how the Solow growth model works, explain what policies should a less-developed country pursue to raise its level of income in the long-run?…
Economics a) Discuss the determinants of aggregate consumption and aggregate investment. Base onhistorical Australian data, which tends to fluctuate more – investment or consumption? You must also answer why it does this, Data must be sourced. (500 Word count) b) Suppose bad economic stats led investors to be more negative about futureprospects on earnings on investment projects. With the help of diagrams, review theimpact of this change on aggregate consumption and income. Word limit 600
2.2 Consider the following functions for a model economy: Consumption: C=C, +c (Y-T) Investment: I=1, + a Y -br Labour Supply: BN° = W/P Money Demand: L=L, +kY - hi Production Function: Y AK N Tax Revenue: T=T, +tY All variables with a subscript 0 denotes the autonomous component, e.g. C, is autonomous consumption. All lower-case letters (except the real interest rate r and the nominal interest rate I) are parameters. Government expenditure (G), the money supply (M), the level of technology (A) and capital stock (K) are all exogenously given. N is the level of labour employed. For this economy, the general price level (P) and the nominal wage rate (W) are fully flexible. The expected inflation is assumed to be zero. (i) Derive the equation that characterizes equilibrium in the goods market. (ii) Derive the equation that characterizes equilibrium in the money market.
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(1)The following macroeconomic model describes the economy of Sunderland. 1. Y= C +I + G + NX 2. C = 220 + 0.63 Y 3. 1 = 1000- 2000R 4. G = Go 5. NX = 525-0.10Y-50OR 6. M (0.1583Y-1000R)P (a)ls it a fair characterization to refer to equation #2 as a "simple" consumption function? Explain. (b)Derive the expression for equilibrium real output, Y, for this economy. Note: In your final expression for Y, restrict coefficient values to three decimal points. (c) Suppose government spending is 1200 , money supply by the Central Bank is 900 and the price level is 1, find the value of GDP (Y) and equilibrium interest rate (R) for Sunderland. Income Identity Consumption function Investment function Government Expenditure Net export function Money market equilibrium (2)The questions in this section are related to the macroeconomic model of Sunderland. (a)The expression you are asked to derive in question #1b can be considered an aggregate demand curve. Do you agree? Explain your answer. (b)Sketch…
Q4. Consider the national - income model where goods can be produced locally or imported. Local consumers, investors and government in addition to foreign countries are the main customers to these goods. Further, government and external demands for goods and services are considered fixed. Investment and imports depend positively on income linearly and private consumption is also depending on private income. 1. Write the system . 2. Find the exogenous and endogenous variables in the above model. 3. Solve the model
1
Which are behavioural equations in the model?

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