Assume that the four-sector model is at play. C+l+G. All expenditures are autonomous. Given: C= 700 + 80 (1- t)Y F0.25 1-210-75i G= 1000 TR=100 L-0.20Y- 40i M/P = 800 Required: 1. Compute for the simultaneous equilibrium interest rate and income for both markets, i.e. asset and goods market. 2. Graph your answer in no. 1. 3. Suppose government expenditure decreases to 880, what happens to equilibrium income and interest rates? Show your proof: computation and graph presentation

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Assume that the four-sector model is at play. C+I+G. All expenditures are autonomous.
Given: C= 700 + .80 (1- t)Y
F0.25
1=210 -75i
G= 1000
TR-100
L-0.20Y- 40i
M/P = 800
Required:
1. Compute for the simultaneous equilibrium interest rate and income for both
markets, i.e. asset and goods market.
2. Graph your answer in no. 1.
3. Suppose government expenditure decreases to 880, what happens to equilibrium
income and interest rates? Show your proof: computation and graph presentation
4. Still related to no. 1. If money supply is increased to 890, do you agree that
income will decrease? Interest rate will increase? Show your proof.
5. Assuming that the fourth sector is included with an autonomous NX of 250, what
happens to equilibrium income and interest rate?
Transcribed Image Text:Assume that the four-sector model is at play. C+I+G. All expenditures are autonomous. Given: C= 700 + .80 (1- t)Y F0.25 1=210 -75i G= 1000 TR-100 L-0.20Y- 40i M/P = 800 Required: 1. Compute for the simultaneous equilibrium interest rate and income for both markets, i.e. asset and goods market. 2. Graph your answer in no. 1. 3. Suppose government expenditure decreases to 880, what happens to equilibrium income and interest rates? Show your proof: computation and graph presentation 4. Still related to no. 1. If money supply is increased to 890, do you agree that income will decrease? Interest rate will increase? Show your proof. 5. Assuming that the fourth sector is included with an autonomous NX of 250, what happens to equilibrium income and interest rate?
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