Assume that the long-run level of output is Y = 1000, which the economy is also at initially in the short-run. Suppose that the consumptionand investment functions are, respectivley,C = 100 + 0.8(Y – T), I= 100 – 2000r,that is, MPC is 0.8. Furthermore, the LM (money market equilibrium) curve is200The government is currently implementing a policy= 80,T = 50,and the central bank (CB) is supplying M = 1000.Expected inflation is a = 0.Continuing from Part 1, due to the uncertainty surrounding the coronavirus, consumers tighten their belts and consumption functionchanges toC = 40 + 0.8(Y – Ť).Focus only on the economy's short-run responses, that is, when the price level P cannot adjust.Fill in the following table for the new values of the nominal interest rate, short-run output, consumption, and investment after the Covidconsumption shock.I*

IS curve shows the relationship between interest rate and the level of output where goods market is…

Assume that the long-run level of output is Y = 1000, which the economy is also at initially in the short-run. Suppose that the consumpti and investment functions are, respectivley, C = 100 + 0.8(Y – T), I = 100 – 2000r, that is, MPC is 0.8. Furthermore, the LM (money market equilibrium) curve is 200 The government is currently implementing a policy Ĝ = 80, Ť = 50, and the central bank (CB) is supplying M = 1000. Expected inflation is = 0. Continuing from Part 1, due to the uncertainty surrounding the coronavirus, consumers tighten their belts and consumption functi changes to C = 40 + 0.8(Y – T'). Focus only on the economy's short-run responses, that is, when the price level P cannot adjust. Fill in the following table for the new values of the nominal interest rate, short-run output, consumption, and investment after the Cov consumption shock. C* I'

Assume that the long-run level of output is Y = 1000, which the economy is also at initially in the short-run. Suppose that the consumpti and investment functions are, respectivley, C = 100 + 0.8(Y – T), I = 100 – 2000r, that is, MPC is 0.8. Furthermore, the LM (money market equilibrium) curve is 200 The government is currently implementing a policy Ĝ = 80, Ť = 50, and the central bank (CB) is supplying M = 1000. Expected inflation is = 0. Continuing from Part 1, due to the uncertainty surrounding the coronavirus, consumers tighten their belts and consumption functi changes to C = 40 + 0.8(Y – T'). Focus only on the economy's short-run responses, that is, when the price level P cannot adjust. Fill in the following table for the new values of the nominal interest rate, short-run output, consumption, and investment after the Cov consumption shock. C* I'

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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This discussion is a continuation of the concept that in the goods market savings is equal to investment. This is known as the (IS) relation.The IS relation is true under a closed economy. However, the story is different under the circumstances where the economy is under recession and characterized by high unemployment. Hayek and Keynes who are notable in this field have different view on the role of savings specially public savings. The criticism of Keynes where he said the infamous line "in the long run we are all dead" pertains to the paradox of savings. Discussion Questions Describe the paradox of savings.
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Consider an economy located near the Indian Ocean where the main industries are agriculture and tourism. Policymakers and economic advisors have determined that consumers' spending behavior is described by the equation: C = 255 + 0.75DI while the domestic investment spending behavior by firms is fixed at $250 billion. Currently, the population is 250 million, the labor force participation rate is 68 percent, and the unemployment rate is 4 percent. The policymakers and economic advisors have also determined that the short run aggregate supply of goods and services in the economy is described by the equation Y = Ypot + 75(P - Pe), while the potential level of real GDP is $2075 billion and the expected price level at full employment, Pe, is 115. Net taxes is described by the equation: T = 120 + 0.2Y while the government spending is fixed at $500 billion. Trading occurs mostly with neighboring economies and currently total imports is $300 billion while total exports is $200 billion.…
Assume that the long-run level of output is Y = 1000, which the economy is also at initially in the short-run. Suppose that the consumption and investment functions are, respectivley, C = 100 + 0.8(Y – Ť), 1- 100— 2000г, that is, MPC is 0.8. Furthermore, the LM (money market equilibrium) curve is M. 200 The government is currently implementing a policy G = 80, Ť = 50, and the central bank (CB) is supplying M = 1000. Expected inflation is T° = 0. Continuing from Part 1, due to the uncertainty surrounding the coronavirus, consumers tighten their belts and consumption function changes to C = 40 + 0.8(Y – T). Focus only on the economy's short-run responses, that is, when the price level P cannot adjust. Derive the new IS curve. It should be written in the form Y = A - Bi, that is, you only need to solve for the values of A = and
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M7
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Are the inventories typically the least liquid of a firm 's current assets? How?