answer only question 8 pls Suppose that the production function for the economy is given by:Y = AL/3K/3Suppose that this economy has 1,000 units of Labour, and 125 units of capital, and TFP (A) isequal to 10.The Short-Run Aggregate Supply Curve (AS) here is given by:Y = 5pAnd when we consider the AEF at a price level of $1,400, the main components of it (C, I, & G)are given by (we are assuming a closed economy NX = 0):C = 300 + 0.8YI = 300G = 2001. What is potential GDP in this question (Y*)? Show your work.Suppose also that for any $10 decrease in price, desired consumption will increase by $5.2. Write down the equation for the Aggregate Demand Curve (AD) in the form ofY = a + bp. Show your work.3. What is the current Short-Run Equilibrium value for Real GDP (Y) and the price level (p)?Show your work.4. Draw the AD, AS, and LRAS curves. Label all x-intercepts and y-intercepts. Are wecurrently in an Inflationary Gap, Recessionary Gap, or in Long-Run Equilibrium? How doyou know? Now suppose that the Central Bank has set the current Money Supply to be equal to $8,000.This Money Supply is currently made up of $2,000 of printed currency, and $6,000 of BankDeposits. The current mandated reserve ratio is 10%.The Demand for Money (MD) as a function of the interest rate ("i") is given by:1MD = 20,000 – 1,000i5. Draw the MS and MD curves in a single figure. Label all x-intercepts and y-intercepts.Where is the equilibrium in the money market? Given this, what is the current prevailingmarket interest rate (i*)?Now suppose that there is an increase in autonomous consumption of 180.6. What will be the new short-run equilibrium Real GDP in this case? Are we in aninflationary gap or output gap now? How large is it? Show your work.Finally, suppose that for every 1% decrease in the interest rate, Desired Consumption willincrease by $25 and Desired Investment will increase by $25.The Central Bank wants to close this output gap.7. If the Central Bank wants to close this gap by changing the Money Supply in circulation,how much does the MS need to change to close this gap? What is the new interest rate?Show your work.8. Suppose instead that the Central Bank wants to reduce the money supply by raisingreserve requirements instead. How much does it need to raise the reserve requirementsto close this gap? Show your work. For the purposes of the next questions, the First MDCurve is as before:MD = 20,000 – 1,000iAnd the Second MD curve a new MD curve:MD = 20,000 – 400i

The central bank is the bank that regulates the money supply in an economy. It means as the money…

Answered: answer only question 8 pls

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answer only question 8 pls

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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