Consider the following model:C- 130 + 0.7 (Y- T)1= 70 + 0.2 Y- 880 iG- 100, T-100(M/P)-0.1Y - 1,000 i(M/P) 60.81. What istheequationChoose.for the IScurve?2. What istheequationChoosefor the LMcurve?3. What istheequilibirumChooseoutput (Y)and interestrate (1)?4. Supposethatgovernmentspendingdecrease toG=50. Whatis the valueof fiscalChoosepolicymultiplier?What is thenewequilibirumvalue of Yand 1?5. Supposethat moneysupplyincrease to5. Supposethat moneysupplyincrease toM= 110.8.What is thevalue ofmonetarypolicymultiplier?What is theChoose.newequilibirumvalue of Yand i?6. Set Gand Msequal to itsinitial valueof (G=100,and Ms =60.8). Nowsupposethat taxesdecrease to Choose.50. What isthe value oftaxmultiplier?What is thenewequilibirumvalue of Yand i? Choose...Y = 820 + 10,000 im = - 2.42 Y = 1,588 i = 9.85%%3DY = 608 + 10,000 iY = 2,300 - 8,800 im = 5.32 Y = 1,242 i= 6.34%Y = 1,596 i = 8%m= 5.32 Y= 1,242 i= 6.34%%3DY = 1,596 i= 8%%3D%3DY = 4,000 - 9,000 im = 4.22 Y = 1,367 i = 7.55%%3D%3Dm = 4.68 Y = 1,742 i = 6.34%%3DY = 1,508 i = 9%m =- 3.72 Y = 1,694 i= 10.86%%3D

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Answered: Consider the following model C- 130 •…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Q.4 Suppose that Y C+I and that consumption function is defined as C= (a-bT) + b(I-k)Y and a-bT >0 A. In the above model leakages are equal to -a+(1-b)Y B. In the above model leakages are equal to bi +bkY C. In the above model leakages are equal to -a+(1-b)Y +bT + khY D. Total injections equal to T+G E. None of the above
Problem 1: Three-period consumption-savings problem Consider a three-period decision problem: max u(co) + Bu(cı) + 3²u(c2) subject to the flow budget constraints for t = 0, 1, 2: br+1 = (1+r)be + Yt - Ct; where bo is the initial wealth of the country. 1. Explain why in this three-period model it cannot be that bz 0. 2. Given this, use the flow budget constraints to derive the intertemporal budget con- straint: C1 Co + C2 Y1 = (1+r)bo + yo + Y2 1+r (1+ r)2 1+r (1+r)2 Interpret this equation. 3. Show that the intertemporal budget constraint is equivalent to nx2 (1+r)bo + nxo+ = 0, (1+r)² 1+r where nx = yt - 4. Explain (in words) why it is also equivalent to bo+ cao+ca, + caz = 0, where ca = rb, + nx = b+1 – bt, and why this latter equation features no discounting. When is it possible to have nx 0.
IS-LM model is defined via seven equations given below: C=15+0.8(Y-T) T= -25+0.25Y I=65-R G=94 X=50-10-0.1Y L=5Y-50R M=1500 C: Consumption, Y: Income, T: Tax, I: Investment, R: Interest Rate, G: Government Expenditure, X: Net Exports, L: Money Demand and M: Money Supply. Solve this system for Y and R in the matrix format by reducing it to IS and LM equations. Calculate government and trade deficits. Note that IS-LM structure is based on Y and R.
Assume a model economy with the following parameters: C=300+0.25 Yd I=250+0.5Y-2500i G=350 T=300 (M/P)d= 4Y-16,000i (M/P)s= 880 Derive the IS and LM relations and solve for equilibrium real output and equilibrium interest rate.
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Suppose the economy of Ghana in 2020 was characterized by C = ¢400m + 0.75(Y-T); I = ¢400m - 20r; G = ¢200m; T = ¢200m; Ms = ¢250m/P; Md = 0.25Y - 10r a. Derive the IS and LM curve equations. Give a brief explanation as to why they are positively or negatively sloped. b. Calculate equilibrium output and interest rates (in this case assume P=1). Econ313 2020/2021 PROBLEM SET 2 Page 1 of 2 c. Suppose the government of Ghana in the second half of 2020 spent an additional ¢50m to mitigate the impact of the COVID pandemic on households and businesses and government tax revenue declined by 10% as a result of the lockdown in Ghana what will be the new equilibrium output? d. Will the policy in (c) above have an impact on interest rate? Briefly explain. e. What is the amount of the fiscal deficit incurred as a result of the government fiscal policies as pursued in (c) above?
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Consider the following 2-period model U(C1,C2) = min{3C1,4C2} C1 + S = Y1 – T1 C2 = Y2 – T2 + (1+r)S Where C1 : first period consumption C2 : second period consumption S : first period saving Y1 = 20 : first period income T1 = 5 : first period lump-sum tax Y2 = 50 : second period income T2 = 10 : second period lump-sum tax r = 0.05 : real interest rate Find the optimal saving, S*
5. Explain the major assumptions of the basic EOQ model.
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Suppose the U.S. economy was at trend and now benefits from a boom in Asia, which raises de by 0.015. All other demand parameters remain unchanged. In order to maintain Y₁ = 0, the Federal Reserve raises the real interest rate R by 0.6 percentage point. Based on this information you know that b =
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