PLease answer all of the questions that are listed on the attached image.Thanks! 4. Consider a classical economy described as follows:1 1Y = LK², where L is the amount of labor and K is the amount of capital. The economyhas 10,000 units of labor and 10,000 units of capital.Consumption (C): 5,020-100r, Investment (I): 2,000-100r, Taxes (T): 2,500, GovernmentPurchases (G) :3,000a. Compute the total production and find the equilibrium interest rate.b. Compute private saving, government saving, and national saving.c. Now suppose that G is reduced by 10. Find the new equilibrium interest rate. Whathappens to consumption, private saving, government saving, national saving andinvestment?5. An economy has a monetary base of 100$ bills. People hold equal amounts of currencyand demand deposits. Banks has 20% of deposits as reserves.What is the money multiplier? Compute the money supply.b. The central bank decides to increase the money supply by 10%. How much should itincrease the monetary base?a.

The money multiplier is the number of times the monetary base is multiplied to create money supply.…

An economy has a monetary base of 100$ bills. People hold equal amounts of currency and demand deposits. Banks has 20% of deposits as reserves. a. What is the money multiplier? Compute the money supply. b. The central bank decides to increase the money supply by 10%. How much should it increase the monetary base?

An economy has a monetary base of 100$ bills. People hold equal amounts of currency and demand deposits. Banks has 20% of deposits as reserves. a. What is the money multiplier? Compute the money supply. b. The central bank decides to increase the money supply by 10%. How much should it increase the monetary base?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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