In the real sector, the following data are available: Consumption Function C = 100 + 0.75Y Investment function I = 60 - 200r Meanwhile, the Monetary sector provides the following data: The amount of money in circulation = 500 Money demand function for Transactions and just in case L1 = 0.2Y Money demand function for Speculation L2 = 428 - 400r Question: a. Determine the interest rate at the time of the General Equilibrium, and what is the equilibrium national income b.Prove that the General Equilibrium really exists! c. The general equilibrium conditions mentioned above can be expressed in a graph

Q: Suppose that the bank of Canada uses money to buy bonds in financial markets during a recession. a)…

A: The central bank perform open market operations of buying and selling bonds in the market to…

Q: 3.) Consider the following IS-LM model: Goods Sector: Y=C+I+G C = 240 + 1.5Y I = 260-500R G = 100…

A: The IS-LM model is a macroeconomic framework that describes the relationship between the goods…

Q: In one version of the monetarist model, we said that the velocity of money, V, is treated as…

A: Given that, In one version of the monetarist model, we said that the velocity of money, V, is…

Q: Which of the following statements is not consistent with Liquidity Preference Theory? All else…

A: The concept of liquidity preference theory was introduced by John Keynes. This theory implies that…

Q: 3-) Consider an economy with the following economic functions; cd = 1000+ 0.45Y - 45000r0.5G Id =…

A: Aggregate demand refers to the total demand for commodities and services made by all the economic…

Q: The U.S. economy has the long-run aggregate supply curve Ÿ" = Ã+K +H where His the growth rate of…

A: Since, you have asked multiple question, we will solve the first question for you. If you want any…

Q: What is meant by Liquidity Trap? Which policy is more effective in liquidity trap and why? Discuss…

A: Liquidity trap is a situation in which,interest rates decrease to a great extent and eventually…

Q: (b) Suppose you want to estimate following demand for money for US economy using data from 1960 to…

A: i.  Since the above model is an exponential model, therefore, such a model can be estimated through…

Q: How much will real GDP increase by if the Federal Reserve decrease the reserve ratio from 20% to 10%…

A: The investment multiplier gauges the influence of investment spending on the entire economy. It is…

Q: Can you please help with the explanation of the below? In contemporary monetary theory, we do not…

A: The main driver of economic activity, in line with financial theory, could be a amendment within the…

Q: A) Provide an explanation of how the Supply-Demand Theory of Interest Rate Determination would…

A: Expectation Theory suggests that long-term interest rate is an average of current and future…

Q: Section A Answer the following question. a) Assume that a country is suffering from rising inflation…

A: Answer a. The government can impact the level of economic activity by adopting proper monetary…

Q: Desired consumption is Cd = 100 + 0.8Y - 500r - 0.5G, and desired investment is Id = 100 - 500r.…

A: Given: Desired Consumption- Cd = 100+0.8Y-500r-0.5G Desired Investment- Id = 100-500r Real Money…

Q: Question 4. Suppose that the bank of Canada uses money to buy bonds in financial markets during a…

A: GIVEN   Suppose that the bank of Canada uses money to buy bonds in financial markets during a…

Q: If the GDP price index is 150, real GDP is $10 trillion, and the quantity of money is $5 trillion,…

A: Here, given information is: GDP price index: 150  Real GDP: $10 trillion Quantity of money: $5…

Q: What is an open market operation? How can a central bank adopt an open market operation to increase…

A: Inflation is a measure of the average price level of goods and services in an economy over a period…

Q: Q.2 Consider the following fixed-price (P-1) IS-LM model Y = C(Yª)+I(r)+G, Yª = Y-ty C=a+byd M=ky-hr…

A: The model represents the economy's interaction of the money market and goods and service market. The…

Q: If the fed orders a contractionary monetary policy, describe what will happen to the following…

A: Contractionary monetary policy is used when central banks raise interest rates while decreasing the…

Q: Consider the following short-run model of closed economy: Good Market: C(Y) = 200+0.4Yd I (r) =…

A: (a) Investment Savings (IS) equation can be found using the equilibrium between aggregate…

Q: 1. For each of the following questions, draw the Money Demand curve (MD) and Money Supply curve (MS)…

A: 1. a) The Fed raises the discount rate :  Fed raising the discount rate is known as a contractionary…

Q: Using the IS-MP framework and assuming there is a temporary one-period consumption boom. Show and…

A: If there is a temporary one-period consumption boom, initially the IS curve shifts towards right to…

Q: The following set of equations describe an economy: C = 15,000+0.5(r-T)-50,000 rl^P = 10,000 -…

A: The objective of this question is to show the numerical equation that relates planned total…

Q: How would the expansionary monetary policy by the Fed of lowering interest rates affect the four…

A: Expansionary monetary policy by the fed results in any increase of money supply, due to the higher…

Q: Given the following data about the monetary sector of the economy : M,= 0.4Y- 80 i Ms = 1200 crores.…

A: i = 1/200 y-15  And y = 200i + 300

Q: Suppose that the money demand function is * - 600 – 75r where r is the interest rate in percent. The…

A:

Q: Consider the model we discussed in class without checkable deposits characterized by money supply…

A: Money Demand : Md = Y L(i ) Money Supply : Ms = M Liquidity demand equation : L(i ) =  2.4 - 3i

Q: There are two countries, the United States and Venezuela. (a) For each country, use the graph below…

A: The overshooting phenomenon assumes sticky prices in the short run. The concept of overshooting…

Q: The interest rate effect states that as the aggregate price level decreases, all else equal, people…

A: Interest rate effect explains the negative slope of aggregate demand.

Q: On the diagram sample (a) show the effect of increase in money demand (money supply is fixed) on…

A: The analysis of the money market and the goods market, which together establish the equilibrium…

Q: You are employed at an Economics consulting firm called Eco Xcel. You have been approached by  a…

A: Monetary policy refers to the management of a country's money supply and interest rates by its…

Q: Suppose that the following equations describe goods and money market equilibrium (symbols are as…

A: IS curve depicts the combination of interest rate and equilibrium output which clears the goods…

Q: (1) Suppose that the demand for real money balances depends on the interest rate, r, and on…

A:

Q: Suppose for an economy C = 200+.25(Y-200) | =.25Y-1000i G = 150 XM= 250 And money supply is given by…

A: The IS curve shows the negative relationship between interest rate and real GDP where goods market…

Q: Which of the following is now NOT the primary instrument of monetary policy of the most central…

A: Monetary policy refers to the tool which is used by the central bank in order to increase or…

Q: equilibrium interest rate

A: The central bank uses different monetary tools to control inflation and money supply in the economy.…

Q: (d) Assume instead that the Canadian central bank takes actions to restore the economy to…

A: Employment refers to the state of having a paid job or being engaged in gainful work, typically…

Q: Md/P) = 2×Yb(r + πe)-a where 0 < b < 1 and 0 < a < 1. a) Use the real money demand above to…

A: Q E4. The Quantity Theory of Money (QTM) states that the money supply is directly proportional to…

Q: 1. Which of the following is concerned with changing the aggregate demand of the nation? A) External…

A: Disclaimer: “Since you have asked multiple question, we will solve the first question for you. If…

Q: 7

A: Given, Money demand function M/P=L(i,Y-T) M/D= real money demand  i= interest rate Y-T= disposable…

Q: Consider a closed economy where the goods and money markets are described by the following…

A: Given  C = 200+0.9(Y-T)                        .... (1) I=400-15r…

Q: If there is no speculative element in the Money Demand Function, while the other functions remain in…

A: Hey, thank you for the question. Since there are multiple questions posted, we will answer first…

Q: Suppose the economy is initially at full employment. Suppose further that in period 1 households…

A: Exchange rate regime refers to the monetary authority in a country who is in charge of managing the…

Q: If the money demand function is unstable and undergoes substantial, unpredictable changes, then the…

A: A money demand function describes the relationship between the income of the individuals, interest…

Q: On the diagram sample (a) show the effect of decrease in money demand (money supply is fixed) on…

A: The LM function represents all the money market equilibria. The diagrammatic representation of the…