Consider a small macroeconomy located near the South Pacific Ocean where the current interest rate is 15 percent and the potential level of real GDP equal to $2.7 billion. Consumers spending behavior is described by the equation: C = 175 + 0.8DI, while firm's investment spending behavior is described by the equation: I = 60 +0.25Y-750r. Trade is allowed and currently, total exports is fixed at $150 million while total imports is described by the equation: IM = 320 +0.1Y. The government's spending is fixed at $840 million and net taxes is described by the equation: T=50+ 0.25Y. (Question 4 of 6) Consider that actual rate of unemployment is 5 percent and the current government implements a monetary policy to stabilize the current economic environment. Given the government's policy, what will be the new equilibrium level of GDP (in millions of dollars)? (report your answer at 2 decimal places)
Consider a small macroeconomy located near the South Pacific Ocean where the current interest rate is 15 percent and the potential level of real GDP equal to $2.7 billion. Consumers spending behavior is described by the equation: C = 175 + 0.8DI, while firm's investment spending behavior is described by the equation: I = 60 +0.25Y-750r. Trade is allowed and currently, total exports is fixed at $150 million while total imports is described by the equation: IM = 320 +0.1Y. The government's spending is fixed at $840 million and net taxes is described by the equation: T=50+ 0.25Y. (Question 4 of 6) Consider that actual rate of unemployment is 5 percent and the current government implements a monetary policy to stabilize the current economic environment. Given the government's policy, what will be the new equilibrium level of GDP (in millions of dollars)? (report your answer at 2 decimal places)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Consider a small macroeconomy located near the South Pacific Ocean where the current interest rate is 15 percent and the potential level of real
GDP equal to $2.7 billion. Consumers spending behavior is described by the equation: C = 175 + 0.8DI, while firm's investment spending
behavior is described by the equation: I = 60 +0.25Y-750r. Trade is allowed and currently, total exports is fixed at $150 million while total
imports is described by the equation: IM = 320 +0.1Y. The government's spending is fixed at $840 million and net taxes is described by the
equation: T=50 + 0.25Y.
(Question 4 of 6)
Consider that actual rate of unemployment is 5 percent and the current government implements a monetary policy to stabilize the current
economic environment.
Given the government's policy, what will be the new equilibrium level of GDP (in millions of dollars)? (report your answer at 2 decimal places)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb90206e9-08b2-4066-9c31-8577660fc164%2F981e568e-2241-446e-99c6-e3f57fcd5d76%2F18j48p_processed.png&w=3840&q=75)
Transcribed Image Text:Consider a small macroeconomy located near the South Pacific Ocean where the current interest rate is 15 percent and the potential level of real
GDP equal to $2.7 billion. Consumers spending behavior is described by the equation: C = 175 + 0.8DI, while firm's investment spending
behavior is described by the equation: I = 60 +0.25Y-750r. Trade is allowed and currently, total exports is fixed at $150 million while total
imports is described by the equation: IM = 320 +0.1Y. The government's spending is fixed at $840 million and net taxes is described by the
equation: T=50 + 0.25Y.
(Question 4 of 6)
Consider that actual rate of unemployment is 5 percent and the current government implements a monetary policy to stabilize the current
economic environment.
Given the government's policy, what will be the new equilibrium level of GDP (in millions of dollars)? (report your answer at 2 decimal places)
![Consider a small macroeconomy located near the South Pacific Ocean where the current interest rate is 15 percent and the potential level of real
GDP equal to $2.7 billion. Consumers spending behavior is described by the equation: C = 175 + 0.8DI, while firm's investment spending
behavior is described by the equation: 1 = 60 + 0.25Y-750r. Trade is allowed and currently, total exports is fixed at $150 million while total
imports is described by the equation: IM = 320 + 0.1Y. The government's spending is fixed at $840 million and net taxes is described by the
equation: T=50 +0.25Y.
(Question 3 of 6)
Consider that actual rate of unemployment is 5 percent and the current government decides to implement a monetary policy to stabilize the
current economic environment.
What more can be said about the government's policy and its expected impact on the economy? (complete the sentences below)
As a result of this policy
One would expect that this would lead aggregate demand to
✓ and
✓
Holding all other factors
constant, real GDP will
and the overall price level will](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb90206e9-08b2-4066-9c31-8577660fc164%2F981e568e-2241-446e-99c6-e3f57fcd5d76%2F69lu0io_processed.png&w=3840&q=75)
Transcribed Image Text:Consider a small macroeconomy located near the South Pacific Ocean where the current interest rate is 15 percent and the potential level of real
GDP equal to $2.7 billion. Consumers spending behavior is described by the equation: C = 175 + 0.8DI, while firm's investment spending
behavior is described by the equation: 1 = 60 + 0.25Y-750r. Trade is allowed and currently, total exports is fixed at $150 million while total
imports is described by the equation: IM = 320 + 0.1Y. The government's spending is fixed at $840 million and net taxes is described by the
equation: T=50 +0.25Y.
(Question 3 of 6)
Consider that actual rate of unemployment is 5 percent and the current government decides to implement a monetary policy to stabilize the
current economic environment.
What more can be said about the government's policy and its expected impact on the economy? (complete the sentences below)
As a result of this policy
One would expect that this would lead aggregate demand to
✓ and
✓
Holding all other factors
constant, real GDP will
and the overall price level will
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