9 Consider the following Keynesian economy:Desired consumption: c° = 220 + 0.6(Y - T)-200rDesired investment: 1° = 300 - 300rTaxes: T= 20 + 0.2YGovernment purchases: G= 152Net exports: NX = 150 - 0.08Y - 500rMoney demand: L = 0.5Y - 200rMoney supply: M= 936Full-employment output: Y = 1000in this economy, the real interest rate does not deviate from the foreign interest rate.a. In the general equilibrium (that is, the long run), the value of output is 1000 , the real interest rate is 0.210, consumption is646 , investment is 237. net exports are -35, and the price level is 2.044.(Enter values rounded to three decimal places for the real interest rate and price level, and enter values rounded to integers for allother values.)b. Starting from full employment, government purchases are increased by 58, to 210. As a result of this change, in the short run,output becomes 1019, the real interest rate becomes 0.257, the consumption becomes 646, investment becomes 223, andnet exports become -60'.(Enter values rounded to three decimal places for the real interest rato, and enter values rounded to integers for all other values.)c. Using the same information as provided in part (b), in the long run, nominal money supply would be the price level would beand the real money supply would be.(Enter a value rounded to three decimal places for the price level, and enter values rounded to integers for all other values.)

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Answered: Consider the following Keynesian…

Consider the following Keynesian economy:

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Output TFC 0 $500 2 500 4 CO 00 6 8 10 500 500 500 500 TVC $0 200 340 590 1000 1650 TC $500 700 840 1090 1500 2150