Q4.Consider a closed economy which can be characterized by the following equations:C 200+ 0.25YDI 150 +0.25Y - 1000iG = 250T = 200(MIP) = 2Y - 80001(MIP) = 1600a) Derive an equation for the IS-curve.b) Derive an equation for the LM-curve.c) Solve for the simultaneous equilibrium on the goods and the money market.d) Compute the equilibrium levels of private consumption (C) and of investmentdemand (I).e) Suppose the central bank wants to increase the money supply to 1840. Whathappens to the equilibrium?

c) The simultaneous equilibrium on the goods and the money market is given by:IS: Y = 1100 -…

Answered: Q4. Consider a closed economy which can…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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)Assume that an economy is characterized by the following equations:C = 250 + 0.75(Y - T);T = 100;G = 50I = 200 - 25rMs = 1000;P = 2;Md /P = Y - 100ra. Using the Keynesian cross model, find the equilibrium level of Y when r = 6 and graph the results.b. Calculate the IS and LM equations. Use the IS-LM model to find the equilibrium level of r and Y.Graph the results.
Suppose we start with a general equilibrium, and the economy experience an improvement in payment technology. Which of the following statements correctly describes how the economy restores the general equilibrium 1. The LM curve shifts to the right 2. The LM curve shifts to the left 3. The IS curve shifts to the right 4. The IS curve shifts to the left 5. The FE curve shifts to the right
Q1: There are two equations for macroeconomic equilibrium in an economy. State them. Show (mathematically) that Savings equals Investment when expenditure equals income. What type of economy would you have when exports equal imports? What happens to the savings-investment relationship if exports are not equal to imports? [This can be greater than or less than]. [Hint: See video lecture on Open Economy Macroeconomics]. Note: Ensure to write out full meanings when you use abbreviations or short forms. This is key to getting full marks.
Assume a infinitely elastic short-run aggregate supply. Consider the following economy: C=C + 8/10 X YD 1=1 TR=TR G=G T=¹/4 X Y X=0 M=0 Potential GDP is 1000, while current GDP is 930. Assuming the mpc on changes in transfers is 1, what is the change in autonomous net transfers that will close the output gap? Round to two decimal places, do not enter the $ sign and remember the minus sign if appropriate. If your answer is -$6.125, enter -6.13.
Suppose the markets for goods and services is in disequilibrium And GNP is too high (to the right of the DD Curve) explain the adjustment process that brings the goods and services market back to equilibrium. Also Graph.
The economy is described by the following functions: C = 110+0.8YD Tx = 20 Tr = 40 I = 70 G = 80 Nx = 30 Suppose transfers increase by 20. By how much would the equilibrium output increase?
I need assitance on how to get these answers.
Individual Retirement Accounts (IRAS) allow people to shelter some of their income from taxation. Suppose the maximum annual contribution to such accounts is $5,000 per person. Shift the appropriate curve(s) on the following graph to show how a decrease in the maximum contribution, from $5,000 to $3,000 per year, would affect the market for loanable funds. INTEREST RATE (Percent) pemand Supply QTY OF LOANABLE FUNDS (Billions of dollars) This change in the tax treatment of saving causes the equilibrium interest rate in the market for loanable funds to and the level of investment spending to
Consider an economy described by the following equations:Y=C + I +GY=7,000G=4000T=2,000C=150+0.75(Y-T)I=1,000-50rb. Calculate the equilibrium interest rate. c. Now suppose the G rises by 1,000. Compute private saving, public saving, andnational saving.d. Calculate the new equilibrium interest rate.For these 3 questions please only show the graphical response.
Below graph these are 5 questions. Where equilibrium will shift to A or to B if : There is a rise in public sector borrowing There is a rise in government government subsidies to the motor industry The government spends less on defence The basic rate of income tax is raised The VAT rate is cut from 20% to 15%.
10
Consider an economy that is characterized by the following equations: C = 150 + 0.65(Y - T) – 200r (Consumption) (Тахation) (Investment Demand) (Government Expenditure) (Exports) (Imports) T = 100 + 0.2Y I = 200 G = 500 - 200r X = 100 IM = 150 + 0.1(Y – T) – 100r (Money Demand) (Money Supply) L = -25 + 0.5Y - 500r M = 133,200 pSR = 120 (Short-Run Price Level) Answer each of the following questions. In your answers, be sure to state any assumptions that you impose and provide an explanation. Derive the AD and SRAS curves. Solve for the short-run equilibrium in the AD-SRAS model. Is your solution the same as in part 3 above? Why or why not? Is the fiscal multiplier in this economy larger or smaller than if the asset market were not accounted for in the model? Briefly explain. True or false? The aggregate demand curve is downward-sloping because the demand for goods and services increases as the price decreases. Briefly explain.

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