Consider an economy described by the following:C= $4 trillionĪG= $1.5 trillion== $3.0 trillionTNX= $3.0 trillion= $1.0 trillionF= 0mpc= 0.8d= 0.35x= 0.15λ= 0.5г= 2a.Derive expressions for the MP curve and the AD curve.b. Calculate the real interest rate and aggregate output when л=2 and π= 4.c. Draw a graph of the MP curve and the AD curve, labelling the points given in part (b).

Explaining each of the answers in detail with 6000 words might be a bit excessive, but I'll provide…

Answered: Consider an economy described by the…

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 a closed economy in which: C=250+0.8 (Y-T)I=400−30 rT=150G=220Y=C+I+G where Y is GDP, C is consumption, I is investment, T is taxes, G is government purchases, and r is the interest rate. If the economy were at full employment (that is, at its natural rate), GDP would be 3,000. a. Suppose the central bank’s policy is to adjust the money supply to maintain the interest rate at 3 percent, so r = 3. Solve for GDP (Y). Y=______ b. How much is the private saving (SPVT)? SPVT=______ c. How much is the government spending multiplier (k)? k=______ d. Assuming no change in monetary policy, what change in government purchases (ΔG) would restore full employment? ΔG=______ e. Assuming no change in fiscal policy, what change in the interest rate (Δr) would restore full employment? Δr=______
Consider the following Keynesian small open economy: c = 50 +0.63Y d = 80 - 500r G = 40 NX = 100 -0.13Y -e e 70 M= 120 L-0.5Y - 300r P- 300 In this economy, the real interest rate does not deviate from the foreign interest rate. Note that if this economy is in general equilibrium, the value of the Interest rate r is 0.1 and the price level is P=1. C. Assuming fiexible exchange rates and a fixed domestic price level, if the foreign interest rate increases by 0,06, then domestic output becomes (Type an integer or a decimal rounded to two decimal places as needed.)
Consider the Aggregate Supply and Demand model. What is the outcome of a decrease in interest rates? Lower price level, lower quantity of real GDP demanded. Lower price level, higher quantity of real GDP demanded. Higher price level, higher quantity of real GDP demanded. Higher price level, lower quantity of real GDP demanded.
Macroeconomics Question No.4 Using the IS–LM diagram, show the effects on output and the interest rate of a decrease in government spending. Can you tell what happens to investment? Why? Using the IS–LM diagram, show the effects on output and the interest rate of a decrease in money supply. Can you tell what happens to investment? Why?
The following set of equations describe an economy: C = 14,400 + 0.5 (Y − T) − 40,000r Ip = 8,000 − 20,000r G = 7,800 NX = 1,800 T = 8,000 Y* = 40,000 Suppose that the real interest rate (r) is 10%. Is the economy in long run equilibrium? If not, what real interest rate should central bank set to restore the economy back to the long run equilibrium? And what methods can central bank use to adjust the interest rate? (Round your answer to 2 decimal places)
In the year of 2019, the U.S. economy produced a total output of $20.75 trillion. During the same year, the U.S. federal government spent $7.88 trillion. The desired consumption and desired investment in the U.S. for the year is described by: Cd=15-150r, Id=10-200r Where Cd is the desired consumption in trillions of $, Id is the desired investment in trillions of $, and r is the real interest rate in decimal form. if the average real interest rate during the year 2019, is 4.1%, how much is the desired national saving, Sd, in trillions of $? round answer to at least 2 decimal places.
In this question, we assume Canada is a closed economy and is in its long-run equilibrium. TransCanada announced that they will not proceed with the East Energy pipeline in October 2017. According to the long-run classical model, what happens to the equilibrium levels of output, real interest rate, and investment in Canada after TransCanada made this announcement? What happens to the real wage in Canada? Explain your answer with the aid of TWOdiagrams - one for the loanable funds market and one for the labour market.
An economy is described by the following equations: C = 2,600+ 0.8 (Y- T) - 10,000r IP = 2,000 10,000r G = 1,800 NX = 0 T = 3,000 The real interest rate, expressed as a decimal, is 0.10 (that is, 10 percent). a. Find a numerical equation relating planned aggregate expenditure to output. Instructions: Enter your response for mpc rounded to one decimal place. PAE=+ 0.8 Y b. Using a table (or algebra if you have used the appendix to this chapter), solve for short-run equilibrium output. Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Leave no cells blank. You must enter 'zero' for the answer to grade correctly. Output Y 9,500 9,600 9,700 9,800 9,900 10,000 10,100 10,200 Planned aggregate expenditure (PAE) Short-run equilibrium output: Y PAE
Consider an economy described by the following equations: Y = C+I+ G C = 150 + 0.6 x (Y - T) I = 500 - 50 xr G = 200 T = 150 where Y is GDP, C is consumption, I is investment, G is government purchases, T is taxes, and r is the interest rate. If the economy were at full employment (that is, at the natural rate of output), GDP would be $1,400. Identify the equation(s) each of the following statements describes. Check all that apply. Statement G It is an autonomous amount, independent of other factors. It is a function of disposable income. It depends on the interest rate. The marginal propensity to consume in this economy is Suppose the central bank's policy is to adjust the money supply to maintain the interest rate at 2%, so r = 2. When the interest rate is 2%, GDP is $ GDP at an interest rate of 2% is the full-employment level. Assuming no change in monetary policy, v in government purchases by $ would restore GDP to the full-employment level. (Note: Assume that this change in fiscal…
1. Consider an economy described by the following data (in $ trillion): Č- 3.25; i- 1.3 ; G= 3.5: T-3.0; NX = -1.00; 7 = 1; mpc= 75; a= 0.3; 6=0.1 a. Drive a simplified expressions for the consumption function, the investment function, and the net export function. a. Drive the expression for the IS curve. b. If the real interest rate is r=2, what is the equilibrium output? If r= 5, what the equilibrium output? c. Draw the graph of the IS curve showing the answers from part (c) above. d. If government purchases increase to $4.2 trillion, what will happen to equilibrium output at r=27 What will happen to equilibrium output at r 5? Show the effect of the increase in government purchases in your graph from (d).
Q#1: [40 pts] (a) Draw an AS/AD graph. Assume that in your graph GDP* = 1,000 (million) and inf* = 8%. Put these values on your graph. If this graph represents the US economy, explain what major problem you see with this equilibrium. (b) Assume that mpc = 0.90 and the US government is considering two options for economic policy [see below]. Draw a graph for each option. Show the change in equilibrium and label the now
Assuming that GDP is fixed, fill in the missing values for Total Amount of Money Demanded Transactions demand = 1,050 Money Supply 1 (Ms1) = 2,850 Money Supply 2 (Ms2) = 2,250 Money Demanded for Total Amount of Rate of Interest Asset Purposes Money Demanded 18% 600 Number 16% 1,200 Number 14% 1,800 Number 12% 2,400 Number 10% 3,000 Number At money supply Ms1, the equilibrium interest rate is Number At money supply Ms2, the equilibrium interest rate is Number

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