Discuss the following statements: a. 'The quantity theory of money implies that money is neutral in the long-run.' b. 'If country A has a higher investment rate than country B, capital will flow to country A and the country will run a current account deficit.' Consider an economy where the various components of expenditure follow these equations: C = 10+ 0.8Y 1 = 100 - 5,000r G = 150 X = 0 M = 0 The money supply is equal to 500 and money demand satisfies the following equation: M₁=Y-2,500r money demand satisfies the following equation: Ma = Y - 2,500r c. Calculate the equilibrium level of GDP and the interest rate in this economy.

Discuss the following statements: a. 'The quantity theory of money implies that money is neutral in the long-run.' b. 'If country A has a higher investment rate than country B, capital will flow to country A and the country will run a current account deficit.' Consider an economy where the various components of expenditure follow these equations: C = 10+ 0.8Y 1 = 100 - 5,000r G = 150 X = 0 M = 0 The money supply is equal to 500 and money demand satisfies the following equation: M₁=Y-2,500r money demand satisfies the following equation: Ma = Y - 2,500r c. Calculate the equilibrium level of GDP and the interest rate in this economy.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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