Consider an economy described by the following data: Autonomous consumption = $ 4 trillion Autonomous Investment = $ 1.5 trillion Government Expenditure = $ 3.0 trillion Taxes = $ 3.0 trillion Autonomous net exports =$ 1.0 trillion Financial frictions (f) = 0.5 mpc = 0.8 Responsiveness of investment to the real interest rate (d) = 0.4 Responsiveness of net exports to the real interest rate (x) = 0.2 Assume that the Fed controls the interest rate and sets the real interest rate at r = 4%. What is the equilibrium level of output?

Consider an economy described by the following data: Autonomous consumption = $ 4 trillion Autonomous Investment = $ 1.5 trillion Government Expenditure = $ 3.0 trillion Taxes = $ 3.0 trillion Autonomous net exports =$ 1.0 trillion Financial frictions (f) = 0.5 mpc = 0.8 Responsiveness of investment to the real interest rate (d) = 0.4 Responsiveness of net exports to the real interest rate (x) = 0.2 Assume that the Fed controls the interest rate and sets the real interest rate at r = 4%. What is the equilibrium level of output?

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

Consider an economy described by the following data:
Autonomous consumption = 5 4 trillion
Autonomous Investment = $ 1.5 trillion
%3D
Government Expenditure = 5 3.0 trillion
%3D
Taxes = $ 3.0 trillion
Autonomous net exports =$ 1.0 trillion
Financial frictions (f) = 0.5
mpc = 0.8
Responsiveness of investment to the real interest rate (d) = 0.4
Responsiveness of net exports to the real interest rate (x) = 0.2
Assume that the Fed controls the interest rate and sets the real interest rate at r = 4%. What is the equilibrium level of output?
O $17.5 trillion
O $12.5 trillion
O $22.5 trillion
$7.5 trillion
O $24 trillion

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