Consider the economy of Farland. C = 200 + 0.75(Y – T) I = 200 – 25r M = 1000; P = 2 G = 100;T = 100 %3D %3D d M = Y – 100r a. Find equilibrium interest rate and the equilibrium level of income Y b. With the initial values for monetary and fiscal policy, suppose that the price level rises from 2 to 4. What happens? What are the new equilibrium iaterest rate and level of income? c. Derive and graph an equation for the aggregate demand curve. What happens to this aggregate demand curve if government increases its purchaşes or National Bank provides more money supply?

Consider the economy of Farland. C = 200 + 0.75(Y – T) I = 200 – 25r M = 1000; P = 2 G = 100;T = 100 %3D %3D d M = Y – 100r a. Find equilibrium interest rate and the equilibrium level of income Y b. With the initial values for monetary and fiscal policy, suppose that the price level rises from 2 to 4. What happens? What are the new equilibrium iaterest rate and level of income? c. Derive and graph an equation for the aggregate demand curve. What happens to this aggregate demand curve if government increases its purchaşes or National Bank provides more money supply?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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