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 – Ť),1- 100— 2000г,that is, MPC is 0.8. Furthermore, the LM (money market equilibrium) curve isM.200The government is currently implementing a policyG = 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 functionchanges toC = 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

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), 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 Ğ = 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 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 B =

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), 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 Ğ = 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 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 B =

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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.…
Consider the following functions for consumption and investment: C = 1,000 + (2/3)*(Y – T) and I = 1,200 – 100*r. Furthermore, Y = 8,000, G = 2500, T = 2,000. Compute private, public, and national savings for this economy, and find the equilibrium real interest rate (r). Assume that G declines by 500 units. How will it change your answers in part (a)? What happens to the national savings, given everything else, if the public decides to consume less out of their disposable income (assume that the propensity of consume falls by 10 percent)? Given your answer in part (c), what happens to investment and real interest rate? Answer all four.
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Suppose an economy is initially in equilibrium at its potential output level. As a result of an unexpected crisis in the financial markets, the AD curve suddenly shift to the left by a horizontal distance equal to $140 billion. Suppose the government has decided to restore the economy to its initial level of output by simultaneously increasing its spending and increasing taxes (so that it does not run into a deficit). Assuming the marginal propensity to consume in this economy is 0.25, by how much must the government increase its spending (and taxes) to achieve its goal? (Calculate your answer in billions of CAD, round it to one decimal places, and write it without units. E.g., write 1.0 for $1 billion.
Suppose we start with a general equilibrium, and the economy experience an improvement in payment technology. Which of the following statements correctly describes the asset market response in the short term? 1. The LM curve shifts to the right 2. The Lm curve remains unchanged 3. The LM curve shifts to the left 4. None of the above
State whether True/false.
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I need a question 2 solution... I attach question 1 for LM and IS equation ....................... i repeat again question 2 solution
Consider an economy in which taxes, planned investment, government spending on goods and services, and net exports are autonomous, but consumption and planned investment change as the interest rate changes. You are given the following information concerning autonomous consumption, the marginal propensity to consume, planned investment, government purchases of goods and services, and net exports: Ca = 1,500 – 20r, c = 0.6; I= 2,450 – 60r; G= 1,980; NX =- 200; T = 1,750. a. Compute the value of the marginal propensity to save. b. Compute the amounts of autonomous planned spending, Ap, when the interest rate equals 0, 2, 4, and 6. c. Compute the equilibrium levels of income when the interest rate equals 0, 2, 4, and 6. Graph the IS curve. d. Suppose that policymakers decide to reduce the number of troops in Afghanistan, which results in a reduction of government spending of $80 billion. Compute the new amounts of autonomous spending, Ap, when the interest rate equals 0, 2, 4, and 6. e.…
If a change in the real interest rate has no effect onplanned investment spending or net exports, what doesthis imply about the slope of the IS curve?
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 – T), I = 100 – 2000r, that is, MPC is 0.8. Furthermore, the LM (money market equilibrium) curve is M Y 200 The government is currently implementing a policy = 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 function changes to C = 40 + 0.8(Y – Ť). Focus only on the economy's short-run responses, that is, when the price level P cannot adjust. Now suppose the government does nothing, and the CB wants to stabilise the economy with a constant r-target policy. a) The CB must react by • money supply, to b) Due to the CB's monetary policy, the LM curve c) Output, Y, changes to d) Consumtpion, C, changes to e) Private investment, I,…