Use the following versions of the IS-LM model to answer all sections:Question: c. determine the equilibrium value of Y, if M = 2,200, P = 1, and Yp = 4000 d. Based on the results of question point c, does the government budget experience a surplus, deficit, or balance? Consumption:C = 1400 + .75*Yd + .08*(M/P)Net Exports:NX= 400 - .25*Yd – 10*rTaxes:T= -200 + .2*YYd = Y - T| = 140 – 30*rG = 200 - .2*(Y – Yp)AD = C + |+ G + NXDisposable Income:Investment:Governmental Purchases:where Yp = potential GDPAggregate Demand:Goods Market EquilibriumY = ADMoney Demand:Money Market EquilibriumMd/P = .25*Y – 50*rM = MdEndogenous VariablesC, Yd, NX, r,T,AD,Y,I,Md,GExogenous VariablesҮр, Р.М

Given: The consumption function is: C = 1,400 + 0.75*Yd + 0.8*M/P Net exports: NX = 400 - 0.25*Yd -…

Answered: Consumption: C = 1400 + .75*Yd +…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Use the following versions of the IS-LM model to answer all sections: Question: c. determine the equilibrium value of Y, if M = 2,200, P = 1, and Yp = 4000 d. Based on the results of question point c, does the government budget experience a surplus, deficit, or balance?

Consumption:
C = 1400 + .75*Yd + .08*(M/P)
Net Exports:
NX= 400 - .25*Yd – 10*r
Taxes:
T= -200 + .2*Y
Yd = Y - T
| = 140 – 30*r
G = 200 - .2*(Y – Yp)
AD = C + |+ G + NX
Disposable Income:
Investment:
Governmental Purchases:
where Yp = potential GDP
Aggregate Demand:
Goods Market Equilibrium
Y = AD
Money Demand:
Money Market Equilibrium
Md/P = .25*Y – 50*r
M = Md
Endogenous Variables
C, Yd, NX, r,T,AD,Y,I,Md,G
Exogenous Variables
Үр, Р.М

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